Summary of Waters Corporation Q4 2025 Earnings Call

1Key Financial Results and Metrics

Q4 2025 Performance:

Reported sales: $932 million, up 7% year-over-year (6% in constant currency).

Adjusted EPS: $4.53, a low double-digit increase; GAAP EPS: $3.77.

Recurring revenue grew 9%, driven by chemistry (12% growth).

Instrument revenue grew 5%, with high single-digit growth in LC-MS but a decline in TA Instruments.

Full Year 2025 Performance:

Sales: $3.4 billion, up 7% (reported and constant currency).

Adjusted EPS: $13.13, up 11%; GAAP EPS: $10.76.

Gross margin: 61.1% for Q4 and 59.3% for the full year.

2Strategic Updates and Business Highlights

Waters completed the acquisition of BD's Biosciences and Diagnostic Solutions business, enhancing its capabilities in bioseparations and bioanalytical characterization.

The company is transitioning its Empower platform to a subscription-based model, which is expected to yield long-term recurring revenue benefits despite a short-term impact on instrument growth.

Strong performance in high-volume testing areas, particularly GLP-1s and PFAS, contributed to growth.

The company is focusing on operational execution improvements, including a centralized pricing strategy and enhanced product launch readiness.

3Forward Guidance and Outlook

2026 Guidance:

Organic constant currency revenue growth expected between 5.5% to 7%.

Total reported revenue anticipated to be approximately $6.405 billion to $6.455 billion, including $3 billion from the acquired BD business.

Adjusted EPS forecast for 2026: $14.30 to $14.50, reflecting 8.9% to 10.4% growth.

Expected adjusted operating margin of approximately 28.1%, with $55 million in cost synergies and $50 million in revenue synergies anticipated.

4Bad News, Challenges, or Points of Concern

The BD business experienced underperformance in Q4 due to several factors, including a weaker flu season and export delays to China, which may impact growth in the near term.

The transition to the subscription model for Empower is expected to create a low single-digit headwind in instrument sales for the quarter.

The academic and government sectors showed declines, and there are concerns about the recovery pace in these markets, particularly in China.

5Notable Q&A Insights

Management acknowledged the challenges faced by the BD assets and emphasized the importance of improving operational execution and pricing discipline to recover growth.

The company is confident in its ability to deliver on its revenue synergy targets, with a focus on instrument replacement and e-commerce adoption.

There was a discussion on the pricing strategy, highlighting a significant opportunity to improve pricing discipline in the acquired BD business, which historically lagged behind Waters' performance.

The Q1 2026 guidance reflects strong momentum, with expectations for low single-digit revenue decline from the BD business, but management remains optimistic about recovery as headwinds diminish. Overall, Waters Corporation is entering 2026 with a strong strategic position and growth outlook, despite facing some near-term challenges related to the integration of the BD business and market conditions.