Summary of Waters Corporation Q3 2025 Earnings Call

1Key Financial Results and Metrics

Sales: $800 million, up 8% year-over-year (YoY) and 4% quarter-over-quarter.

Earnings: Non-GAAP EPS of $3.40, a 16% increase YoY, exceeding guidance by $0.20.

Gross Margin: 59%, a 70 basis point increase from the previous quarter.

Recurring Revenue: Grew 9%, with service up 7% and chemistry up 13%.

Debt: Net debt stood at $948 million.

Free Cash Flow: $160 million after capital expenditures and transaction-related expenses.

2Strategic Updates and Business Highlights

Innovation: Launched the Xevo CDMS, a breakthrough in mass spectrometry, and saw strong adoption of new products like the Alliance iS and Xevo TQ Absolute.

Market Performance: Instrument sales grew 6%, driven by high single-digit growth in the LC-MS portfolio. Recurring revenue growth was robust, particularly in chemistry.

Geographic Strength: Strong performance in the Americas (11% growth), Asia (13% growth), and particularly in China (20% growth).

Pending Acquisition: Integration planning for the combination with BD's Biosciences & Diagnostic Solutions is progressing well, with expectations for synergy realization.

3Forward Guidance and Outlook

2025 Guidance: Sales growth revised to a range of 6.7% to 7.3% (midpoint of 7%), and adjusted EPS guidance raised to $13.05 to $13.15, reflecting double-digit growth.

Q4 Expectations: Anticipating constant currency sales growth of 5% to 7% and adjusted EPS of $4.45 to $4.55.

2026 Outlook: Positioned for continued growth driven by instrument replacement cycles, service expansion, and new product launches.

4Bad News, Challenges, or Points of Concern

Market Headwinds: Some segments, such as CROs and branded generics in China, are still experiencing slower growth.

Academic & Government Segment: Growth in this area is tied to stimulus funding, which may not be sustainable long-term.

Margin Pressure: New product launches may initially exert downward pressure on margins until they scale.

Tax Rate Fluctuations: A projected increase in the tax rate for Q4 could impact earnings.

5Notable Q&A Insights

Pharma Growth: Strong performance attributed to instrument replacement cycles and new product traction, particularly in GLP-1 testing and bioanalytical characterization.

BD Transaction: Confidence in achieving revenue synergies; integration planning is well underway, with a focus on immediate revenue opportunities.

China's Market Dynamics: Growth driven by local CDMOs and biotech, with expectations for continued double-digit growth in the near term.

Biosimilar Opportunity: Regulatory changes could significantly increase demand for Waters' analytical instruments, enhancing market access for biosimilars.

Chemistry Growth: Strong performance attributed to innovation in bioseparations, with expectations for continued growth despite some pull-forward dynamics from previous quarters. Overall, Waters Corporation reported a strong quarter with solid growth across various segments, driven by innovation and strategic execution, while also preparing for future challenges and opportunities.