Waters Corporation (NYSE: WAT) Reports Third Quarter 2022 Financial Results

Highlights

• Sales of $709 million grew 7% as reported and 15% in constant currency
• Instrument sales grew 21% in constant currency, with strong growth across LC, MS, and TA product lines
• Industrial grew 22% in constant currency, with broad strength across food and environmental, chemical analysis, and TA
• All major geographies grew double-digits in constant currency, led by 23% growth in China
• Recurring revenues grew double-digits in constant currency, supported by commercial initiatives

Waters Corporation (NYSE: WAT) today announced its financial results for the third quarter of 2022.

“Our team is consistently delivering outstanding results in resilient markets. This is reflected in the double-digit growth across all regions, led by instrument sales growing more than 20% and recurring revenues generating double-digit growth in constant currency for the third quarter,” said Dr. Udit Batra, President & CEO, Waters Corporation.

Batra continued, “What excites me most is that our commercial momentum is well supported by revitalized innovation across the portfolio. The Arc^TM HPLC system, Xevo^TM TQ Absolute mass spectrometer, MaxPeak^TM Premier columns and our TA Instruments Discovery™ Rheometers all made strong contributions to our third quarter results. Our high growth initiatives are gaining interest with customers especially in bioanalytical characterization and battery testing.”

Third Quarter 2022

Sales for the third quarter of 2022 were $709 million, an increase of 7% as reported and 15% in constant currency, compared to sales of $659 million for the third quarter of 2021.

On a GAAP basis, diluted earnings per share (EPS) for the third quarter of 2022 was $2.60, compared to $2.60 for the third quarter of 2021. On a non-GAAP basis, EPS was $2.64, compared to $2.66 for the third quarter of 2021. This includes a headwind of approximately 13% due to unfavorable foreign exchange.

During the third quarter of 2022, sales into the pharmaceutical market increased 2% as reported and 9% in constant currency, sales into the industrial market increased 14% as reported and 22% in constant currency and sales into the academic and government markets increased 21% as reported and 29% in constant currency.

During the quarter, instrument system sales increased 14% as reported and 21% in constant currency, while recurring revenues, which represent the combination of service and precision chemistries, increased 2% as reported and 10% in constant currency.

Geographically, sales in Asia during the quarter increased 10% as reported and 18% in constant currency (with China sales growing 21% as reported and 23% in constant currency), sales in the Americas increased 11% (with U.S. sales growing 11%) and sales in Europe decreased 1% as reported and increased 14% in constant currency.

Year-To-Date 2022

Sales for the first nine months of 2022 were $2,113 million, an increase of 8% as reported and 14% in constant currency, compared to sales of $1,949 million for the first nine months of 2021.

On a GAAP basis, EPS for the first nine months of 2022 increased to $7.94, compared to $7.66 for the first nine months of 2021. On a non-GAAP basis, EPS increased by 9% to $8.20, compared to $7.54 in the first nine months of 2021. This includes a headwind of approximately 10% due to unfavorable foreign exchange.

For the first nine months of 2022, sales into the pharmaceutical market increased 7% as reported and 12% in constant currency, sales into the industrial market increased 10% as reported and 15% in constant currency and sales into the academic and government markets increased 11% as reported and 16% in constant currency.

For the first nine months of 2022, instrument system sales increased 14% as reported and 19% in constant currency, while recurring revenues increased 4% as reported and 9% in constant currency.

Geographically, sales in Asia for the first nine months of 2022 increased 8% as reported and 14% in constant currency (with China sales growing 16%), sales in the Americas increased 17% (with U.S. sales growing 17%) and sales in Europe decreased 1% as reported and increased 10% in constant currency.

Unless otherwise noted, sales growth and decline percentages are presented on an as-reported basis and are the same as the sales growth and decline percentages presented on a constant currency basis as compared with the same period in the prior year, each of which is detailed in the reconciliation of sales growth rates to constant currency growth rates in the tables below.

A description and reconciliation of GAAP to non-GAAP results appear in the tables below and can be found on the Company’s website www.waters.com in the Investor Relations section.

Full-Year and Fourth Quarter 2022 Financial Guidance

The Company is raising its full-year 2022 sales guidance, and now expects constant currency sales growth in the range of 11.5% to 12%. Currency translation is expected to decrease full-year sales growth by approximately 6%. The Company is updating its full-year 2022 non-GAAP EPS guidance with an updated range of $11.85 to $11.95, which includes an estimated headwind of approximately 11% due to unfavorable foreign exchange. Please refer to the tables below for a reconciliation of the projected GAAP to non-GAAP financial outlook for the full-year.

The Company expects fourth quarter 2022 constant currency sales growth in the range of 6% to 8%. Currency translation is expected to decrease fourth quarter sales growth by approximately 8%. The Company expects fourth quarter 2022 non-GAAP EPS in the range of $3.66 to $3.76, which includes an estimated headwind of approximately 15% due to unfavorable foreign exchange. Please refer to the tables below for a reconciliation of the projected GAAP to non-GAAP financial outlook for the fourth quarter.

Conference Call

Waters Corporation will webcast its third quarter 2022 financial results conference call today, November 1, 2022, at 8:00 a.m. Eastern Time. To listen to the call and see the accompanying slide presentation, please visit www.waters.com, select “Investors” under the “About Waters” section, navigate to “Events & Presentations,” and click on the “Webcast.” A replay will be available through at least November 15, 2022, at midnight Eastern Time on the same website by webcast and also by phone at (888) 566-0418.

About Waters Corporation

Waters Corporation (NYSE: WAT), a global leader in analytical instruments and software, has pioneered chromatography, mass spectrometry and thermal analysis innovations serving the life, materials and food sciences for more than 60 years. With more than 7,800 employees worldwide, Waters operates directly in 35 countries, including 14 manufacturing facilities, and with products available in more than 100 countries. For more information, visit www.waters.com.

Non-GAAP Financial Measures

This press release contains financial measures, such as constant currency growth rate, adjusted operating income, adjusted net income, adjusted earnings per diluted share and adjusted free cash flow, among others, which are considered “non-GAAP” financial measures under applicable U.S. Securities and Exchange Commission rules and regulations. These non-GAAP financial measures should be considered supplemental to, and not a substitute for, financial information prepared in accordance with U.S. generally accepted accounting principles (GAAP). The Company’s definitions of these non-GAAP measures may differ from similarly titled measures used by others. The non-GAAP financial measures used in this press release adjust for specified items that can be highly variable or difficult to predict. The Company generally uses these non-GAAP financial measures to facilitate management’s financial and operational decision-making, including evaluation of the Company’s historical operating results, comparison to competitors’ operating results and determination of management incentive compensation. These non-GAAP financial measures reflect an additional way of viewing aspects of the Company’s operations that, when viewed with GAAP results and the reconciliations to corresponding GAAP financial measures, may provide a more complete understanding of factors and trends affecting the Company’s business. Because non-GAAP financial measures exclude the effect of items that will increase or decrease the Company’s reported results of operations, management strongly encourages investors to review the Company’s consolidated financial statements and publicly filed reports in their entirety. Reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the tables accompanying this release.

Cautionary Statement

This release contains “forward-looking” statements regarding future results and events. For this purpose, any statements that are not statements of historical fact may be deemed forward-looking statements. Without limiting the foregoing, the words “feels”, “believes”, “anticipates”, “plans”, “expects”, “intends”, “suggests”, “appears”, “estimates”, “projects” and similar expressions, whether in the negative or affirmative, are intended to identify forward-looking statements. The Company’s actual future results may differ significantly from the results discussed in the forward-looking statements within this release for a variety of reasons, including and without limitation, risks related to the effects of the ongoing COVID-19 pandemic on our business, financial condition, results of operations and prospects, including: portions of our global workforce being unable to work fully and/or effectively due to working remotely, illness, quarantines, including the impact from the lockdown in China, government actions, facility closures or other reasons related to the pandemic, increased risks of cyber-attacks resulting from our temporary remote working model, disruptions in our manufacturing capabilities or to our supply chain and distribution network, volatility and uncertainty in global capital markets limiting our ability to access capital, customers being unable to make timely payments for purchases and volatility in demand for our products; foreign currency exchange rate fluctuations potentially affecting translation of the Company’s future non-U.S. operating results, particularly when a foreign currency weakens against the U.S. dollar; the impact on demand for the Company’s products, including delays or disruptions to our distribution network, among the Company’s various market sectors or geographies from economic, sovereign and political conditions and uncertainties, particularly regarding the effect of new or proposed tariff or trade regulations or changes in the interpretation or enforcement of existing regulations; the effect on the Company’s financial results from the United Kingdom exiting the European Union, as well as the Chinese government’s ongoing tightening of restrictions on procurement by government-funded customers; fluctuations in expenditures by the Company’s customers, in particular large pharmaceutical companies; introduction of competing products by other companies and loss of market share; pressures on prices from competitors and/or customers; regulatory, economic and competitive obstacles to new product introductions; lack of acceptance of new products; expansion of our business in developing markets; spending by certain end-markets; ability to obtain alternative sources for components and modules; and the possibility that future sales of new products related to acquisitions, which trigger contingent purchase payments, may exceed the Company’s expectations; other changes in demand for the Company’s products from the effect of mergers and acquisitions by the Company’s customers; increased regulatory burdens as the Company’s business evolves, especially with respect to the U.S. Food and Drug Administration and U.S. Environmental Protection Agency, among others; as well as regulatory, environmental, and logistical obstacles affecting the distribution of the Company’s products, completion of purchase order documentation and the ability of customers to obtain letters of credit or other financing alternatives; shifts in taxable income in jurisdictions with different effective tax rates; the outcome of tax examinations or changes in respective country legislation affecting the Company’s effective tax rate; the effect of the adoption of new accounting standards; the ability to access capital, maintain liquidity and service the Company’s debt in volatile market conditions, including any potential impact on the Company’s operations stemming from sustained inflation, particularly in the U.S., as a large portion of the Company’s cash is held and operating cash flows are generated outside the U.S.; environmental and logistical obstacles affecting the distribution of products and risks associated with lawsuits and other legal actions, particularly involving claims for infringement of patents and other intellectual property rights; and the impact and costs of war, in particular as a result of the ongoing conflict between Russia and Ukraine, and the possibility of further escalation resulting in a new geopolitical and regulatory instability. Such factors and others are discussed more fully in the sections entitled “Forward-Looking Statements” and “Risk Factors” of the Company’s annual report on Form 10-K for the year ended December 31, 2021, as well as in the sections entitled “Special Note Regarding Forward-Looking Statements” and “Risk Factors” of the Company’s quarterly reports on Form 10-Q for the quarterly periods ended April 2, 2022, July 2, 2022, and October 1, 2022 as filed with the Securities and Exchange Commission (“SEC”), which discussions are incorporated by reference in this release, as updated by the Company’s future filings with the SEC. The forward-looking statements included in this release represent the Company’s estimates or views as of the date of this release and should not be relied upon as representing the Company’s estimates or views as of any date subsequent to the date of this release. Except as required by law, the Company does not assume any obligation to update any forward-looking statements.

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