WAT — Waters Corporation

Summary of Waters Corporation Q4 2025 Earnings Call

1. Key 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.

2. Strategic 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.

3. Forward 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.

4. Bad 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.

5. Notable 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.