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

Highlights

• Sales of $714 million grew 5% as reported and 10% in constant currency
• Continued strong momentum as instrument sales grew 12% in constant currency, with double-digit growth across LC, MS and TA product lines
• Broad-based performance across all end-markets and major geographies, led by mid-teens growth in the U.S. and 9% constant currency growth in China
• Recurring revenues grew high-single-digits as strong commercial execution continued
• GAAP EPS of $2.72; non-GAAP EPS of $2.75, a 6% increase from prior year

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

“Our team’s strong focus on execution continued to deliver excellent results, despite the challenging macroeconomic environment, with instrument sales growing 12% and recurring revenues growing 8% in constant currency in the second quarter. The sustained commercial momentum and broad-based growth in each of our regions reflects continued strong customer demand across the attractive growth markets that we serve,” said Dr. Udit Batra, President and Chief Executive Officer of Waters Corporation.

Dr. Batra continued, “Our rejuvenated portfolio continues to capture growth opportunities in both large and small molecule applications, with Arc^TM HPLC, ACQUITY^TM Premier, and MaxPeak^TM Premier columns again providing a strong contribution to growth in the quarter. Meanwhile, we are increasingly well-positioned to support the workflows of more complex molecules as they move downstream through process development and into high volume applications. With the recent release of the Xevo^TM G3 Q-TOF and new applications on waters_connect^TM, we are continuously adding new capabilities to enhance the characterization and quantitation of biologics and novel modalities.”

Second Quarter 2022

Sales for the second quarter of 2022 were $714 million, an increase of 5% as reported and 10% in constant currency, compared to sales of $682 million for the second quarter of 2021.

On a GAAP basis, diluted earnings per share (EPS) for the second quarter of 2022 was $2.72, compared to $2.69 for the second quarter of 2021. On a non-GAAP basis, EPS increased by 6% to $2.75, compared to $2.60 for the second quarter of 2021. This includes a headwind of approximately 11% due to unfavorable foreign currency translation.

During the second quarter of 2022, sales into the pharmaceutical market increased 5% as reported and 10% in constant currency, sales into the industrial market increased 3% as reported and 8% in constant currency and sales into the academic and government markets increased 10% as reported and 16% in constant currency.

During the quarter, instrument system sales increased 7% as reported and 12% in constant currency, while recurring revenues, which represent the combination of service and precision chemistries, increased 3% as reported and 8% in constant currency.

Geographically, sales in Asia during the quarter increased 3% as reported and 9% in constant currency (with China sales growing 9%), sales in the Americas increased 14% as reported and 15% in constant currency (with U.S. sales growing 14%) and sales in Europe decreased 4% as reported and increased 7% in constant currency.

First Half 2022

Sales for the first half of 2022 were $1,405 million, an increase of 9% as reported and 13% in constant currency, compared to sales of $1,290 million for the first half of 2021.

On a GAAP basis, EPS for the first half of 2022 increased to $5.35, compared to $5.05 for the first half of 2021. On a non-GAAP basis, EPS increased by 13% to $5.55, compared to $4.89 in the first half of 2021.

For the first half of 2022, sales into the pharmaceutical market increased 10% as reported and 14% in constant currency, sales into the industrial market increased 8% as reported and 12% in constant currency and sales into the academic and government markets increased 5% as reported and 10% in constant currency.

For the first half of 2022, instrument system sales increased 15% 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 half of 2022 increased 7% as reported and 11% in constant currency (with China sales growing 13%), sales in the Americas increased 20% (with U.S. sales growing 21%) and sales in Europe decreased 1% as reported and increased 8% 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 Third Quarter 2022 Financial Guidance

The Company is raising its full-year 2022 guidance, and now expects constant currency sales growth in the range of 9.5% to 10.5%. Currency translation is expected to decrease full-year sales growth by approximately five percentage points. The Company is reaffirming the mid-point of its full-year 2022 non-GAAP EPS guidance with an updated range of $11.95 to $12.05, which includes an estimated headwind of approximately 9% due to unfavorable foreign currency translation. 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 third quarter 2022 constant currency sales growth in the range of 8% to 10%. Currency translation is expected to decrease third quarter sales growth by approximately six percentage points. The Company expects third quarter 2022 non-GAAP EPS in the range of $2.50 to $2.60, which includes an estimated headwind of approximately 10% due to unfavorable foreign currency translation. Please refer to the tables below for a reconciliation of the projected GAAP to non-GAAP financial outlook for the third quarter.

Conference Call

Waters Corporation will webcast its second quarter 2022 financial results conference call today, August 2, 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 August 16, 2022 at midnight Eastern Time on the same website by webcast and also by phone at (800) 685-6061.

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, 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 exchange rate fluctuations potentially affecting translation of the Company’s future non-U.S. operating results; 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 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; 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; 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; 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 report on Form 10-Q for the quarterly period ended April 2, 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.

Arc, ACQUITY, MaxPeak, Xevo, and waters_connect are trademarks of Waters Corporation.

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