Waters(WAT) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q3 2024, sales reached $740 million, growing 4% as reported and 4% in constant currency, exceeding guidance [41][13] - Adjusted EPS was$ 2.93, up 3% year-over-year, while GAAP EPS was $2.71 [50][13] - Gross margin expanded by 20 basis points to 59.3%, and adjusted operating margin was 30.8% [24][49] Business Line Data and Key Metrics Changes - Instruments grew 1%, chemistry grew 8%, and service grew 6% [47] - Recurring revenues returned to high single-digit growth, reflecting strong customer activity and installed base utilization [48] - In Pharma, sales grew 3%, while Industrial grew 7%, and Academic and Government remained flat [42] Market Data and Key Metrics Changes - All reported regions returned to growth, with mid-single-digit sales growth in Asia and Europe, and low single-digit growth in the Americas [45] - Excluding China, sales grew 5%, while in China, sales declined mid-single digits, showing improvement from previous quarters [45][46] - Orders in China were in line with last year, with expectations for positive growth in Q4 [46][90] Company Strategy and Development Direction - The company is focused on operational excellence, innovation, and expanding its product portfolio to meet customer needs [12][35] - Future growth is expected to be driven by GLP-1 adoption in pharma and PFAS-related testing in non-pharma segments [27][28] - The company is well-positioned to capitalize on the upcoming patent expirations of key blockbuster drugs [28] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the recovery of the instrument replacement cycle and the positive momentum in customer spending [59][60] - The company anticipates continued growth in recurring revenues and strong performance in the chemistry segment [94][96] - Management highlighted the importance of the generics market in India and the potential for significant revenue from upcoming patent expirations [70][105] Other Important Information - The company raised its full-year 2024 organic constant currency sales growth guidance to a range of negative 0.9% to negative 0.3% [39][56] - Free cash flow for Q3 was$ 179 million, with a year-to-date free cash flow of $556 million, representing 27% of sales [51][52] - The company reduced debt by approximately$ 180 million in Q3, resulting in a net debt position of about $1.5 billion [52] Q&A Session Summary Question: Insights on the LC replacement cycle and drivers for future growth - Management noted that the LC segment has returned to growth after seven quarters of decline, driven by strong performance in large pharma QA/QC applications and generics in India [67][70] Question: Comments on the guidance and end markets - Management indicated that all end markets exceeded expectations, leading to an increase in Q4 guidance, with a focus on maintaining a consistent revenue ramp from Q3 to Q4 [82][84] Question: Update on China market conditions and stimulus impact - Management reported that China sales came in line with expectations, with orders matching last year, and expressed optimism about capitalizing on upcoming stimulus [86][90] Question: Positioning in instrumentation growth and recurring revenue sustainability - Management emphasized the stability of recurring revenues and the strong position in QA/QC testing, which differentiates the company from peers [92][96]