Waters Q1 2025 Earnings Call Transcript

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Provided by Quartr
May 6, 2025
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Operator

Good morning. Call is being recorded. If you have any objections, please disconnect at this time. It is now my pleasure to turn the call over to mister Caspar Tudor, head of investor relations. Please go ahead, sir.

Caspar Tudor
Caspar Tudor
Head, Investor Relations at Waters

Thank you, Leila, and good morning, everyone. Welcome to Walters Corporation's first quarter earnings call. Joining me today are doctor Udit Batra, our president and chief executive officer and Amol Chawwal, our senior vice president and chief financial officer. Before we begin, I will cover the cautionary language. In this conference call, we will make forward looking statements regarding future events or future financial performance of the company.

Caspar Tudor
Caspar Tudor
Head, Investor Relations at Waters

We will provide guidance regarding possible future results as well as commentary on potential market and business conditions that may impact Waters Corporation over the second quarter of twenty twenty five and full year 2025. These statements are only our present expectations, and actual events or results may differ materially. Please see the risk factors included within our Form 10 ks, our Form 10 Qs, and the cautionary language included in this morning's earnings release. During today's call, we will refer to certain non GAAP financial measures. Reconciliations to the most directly comparable GAAP measures are attached to our earnings release and in the appendix of the slide presentation accompanying today's call.

Caspar Tudor
Caspar Tudor
Head, Investor Relations at Waters

Both are available on the Investor Relations section of our website. Unless stated otherwise, references to quarterly results increasing or decreasing are in comparison to the first quarter of fiscal year twenty twenty four. In addition, unless stated otherwise, all year over year revenue growth rates and ranges given on today's call are on a comparable constant currency basis. Finally, we do not intend to update our guidance, predictions, or projections except as part of a regularly scheduled earnings release or as otherwise required by law. Now as we begin, thank you all for joining us today.

Caspar Tudor
Caspar Tudor
Head, Investor Relations at Waters

We've structured today's call to highlight how Waters' resilient growth profile, operational agility, and innovation are driving strong results as we navigate a dynamic global environment, including recently announced tariffs. Hudip will start by framing our key messages and cover how we are well positioned to deliver against our twenty twenty five objectives. Amol will then walk you through a detailed review of our first quarter performance, updated guidance, and the actions we have taken to stay ahead of evolving external conditions. After their remarks, we will open the lines for questions. With that, let me turn it over to Uday.

Udit Batra
Udit Batra
President and CEO at Waters

Thank you, Caspar, and, good morning, everyone. We had a fantastic start to the year. Double digit instrument growth drove our performance as customer spending, especially in pharma, exceeded expectations. Demand remained solid across all our end markets and geographies. These results are driven by our strong commercial execution and our steadfast commitment to operational excellence.

Udit Batra
Udit Batra
President and CEO at Waters

I wanna take a moment to thank all my colleagues for their dedication and outstanding performance. Their focus and agility enable us to accelerate the benefits of pioneering science and deliver solid financial outcomes, especially in dynamic market conditions. We have consistently shown leadership through turbulent times. Just look at the last five years where we have successfully navigated the pandemic, the global chip shortage, supply chain disruptions, and inflationary pressures. Through it all, Waters has become a stronger company by focusing on three guiding principles.

Udit Batra
Udit Batra
President and CEO at Waters

First, we stay close to our customers and work tirelessly and with urgency to support their evolving needs as conditions shift. Second, while mitigating risks, we never lose sight of opportunities to enhance our competitive position. We remain focused on launching differentiated new products and investing in our capabilities. Third, we redouble support and communication with our colleagues who are dedicated to the mission of the company and lead with an indomitable spirit. Strength true to these principles has enabled us to consistently deliver robust results over the past five years.

Udit Batra
Udit Batra
President and CEO at Waters

Today, we continue to navigate a dynamic macro environment. However, our resilient downstream weighted revenue profile and swift operational action actions position us to deliver high single digit earnings growth this year even after accounting for newly announced tariffs. Amol and I will discuss these points in greater detail later in the call. Turning now to our results. In the first quarter, sales grew 4% as reported and 7% in constant currency landing at the high end of our guidance.

Udit Batra
Udit Batra
President and CEO at Waters

Instruments grew 11% led by mid teens sales growth in both liquid chromatography and mass spectrometry, with strength driven by pharma and industrial end markets. Recurring revenue increased mid single digits, which is in line with our expectations for a quarter with two fewer days. In China, sales grew 5% led by double digit growth in both industrial and academic and government applications. Earnings per share were also at the high end of guidance supported by strong sales volume and an improvement in FX. Non GAAP earnings per share were $2.25 reflecting low single digit growth and high single digit growth in constant currency terms.

Udit Batra
Udit Batra
President and CEO at Waters

On a GAAP basis, EPS was $2.03. Our 11% instrument growth was led by mid teens growth in pharma. Additionally, order growth exceeded sales growth highlighting continued momentum in our business. These results underscore our strong position in attractive secular markets, particularly as customer CapEx spending has continued its recovery. As I highlight the drivers behind our strength, our message remains consistent.

Udit Batra
Udit Batra
President and CEO at Waters

First, our team is executing well in an analytical instruments market still early in its recovery. Second, our revitalized portfolio closely aligns with customer needs at a time when instruments are ripe for replacement. Our innovation remains highly differentiated in markets that we serve commanding premium pricing. And thirdly, our leadership position in downstream high volume applications enables us to capture growth across an exciting mix of fast growing testing opportunities such as those of GLP one, PFAS, and generics testing. Innovation played a key role this quarter reflecting an excellent customer adoption of our new products.

Udit Batra
Udit Batra
President and CEO at Waters

In liquid chromatography, sales of our Alliance IS HPLC system more than tripled year over year driven by growth across replacement and greenfield opportunities. Within replacement, customers are upgrading to leverage its smart features, flexibility, and productivity advantages. At the same time, adoption at new and expanding manufacturing facilities within pharma is particularly strong, notably among large US CapEx investments. We recently expanded the Alliance IS bio HPLC product line by adding the photodiode array detector to enhance spectral insights for biopharma development and QC. Waters now has four configurations of Alliance IS HPLC platform to support routine quantitative test quantitative analysis and expanded spectral analysis of small and large molecules in development and in QC.

Udit Batra
Udit Batra
President and CEO at Waters

Mass spectrometry growth was led by Zevo TQ by our Zevo TQ Absolute System, our top spelling our top selling mass spec again this quarter, achieving sales growth of over 50%. Its superior sensitivity and sustainable design continue to drive demand, particularly in high volume testing areas such as food and environmental analysis and pharma quantitation. In our chemistry consumables business, MaxPeak Premier columns again significantly exceeded expectations, growing more than 30%. These products provide excellent solutions for separating complex molecules such as biologics and novel therapeutic modalities. Our differentiated portfolio continues to command strong pricing.

Udit Batra
Udit Batra
President and CEO at Waters

As we look as we look ahead, this combination serves us well as a mechanism to provide offsets and capitalize on new demand opportunities in a dynamic global environment. Our unique our unique exposure to emerging high volume testing drivers also contributed meaningfully to our growth this quarter. For GLP one testing, we saw continued demand of our PATROL UPLC system. This advanced analytical tool has become indispensable for in process testing of these peptides during manufacturing. Additionally, our chemistry and HPLC offerings saw continued momentum in post fill finish quality testing supported by solid CapEx investment and production volumes.

Udit Batra
Udit Batra
President and CEO at Waters

While we have a leading position in the analytical testing of current GLP one injectables on the market today, we are also very well positioned for future oral introductions. PFAS related testing sales grew over 90% in the first quarter, continuing the 40% plus growth trend seen both in 2023 and 2024. LCMS has become the dominant workhorse technique for regulated analysis of these compounds, including drinking water, soil, and wastewater compliance monitoring. This is because most regulated compounds are polar and nonvolatile, making them best suited for liquid chromatography. We expect emerging regulations governing PFAS to drive testing in areas like food packaging and consumer products, which is an attractive opportunity for Waters.

Udit Batra
Udit Batra
President and CEO at Waters

Given the need to detect these same nonvolatile compounds, LCMS is also the method of choice in these areas. Our India team again delivered revenue growth close to 20% in constant currency, driven by strong demand from generics manufacturers and CDMOs. Looking ahead, as outlined at our recent investor day, we expect approximately 30 basis points of annual growth accretion from both GLP-one and PFAS testing and an additional 70 to a hundred basis points from growth in India. These volume growth drivers combined with the instrument replacement cycle and our strong pricing performance present a compelling high single digit plus growth profile for our company in the near to midterm. Turning now to new products.

Udit Batra
Udit Batra
President and CEO at Waters

In the first quarter, we launched two new products in the TA division. The Electroforce Apex one for precise mechanical testing of high performance polymers and composites, and TGA SmartSeal pans, which support analysis of atmosphere sensitive materials in battery, polymer, and drug development testing. Today, we also announced the launch of Empower for multi angle light scattering detectors, which is an important milestone and commitment from our integration of Wyatt. This advancement expands the scope of critical quality attributes that a biopharmaceutical laboratory can manage and submit to regulators using our Empower software. Our steady stream of innovation continues to strengthen our core business and support our expansion into higher growth adjacencies.

Udit Batra
Udit Batra
President and CEO at Waters

I will now cover our updated twenty twenty five full year guidance. Waters has a unique and resilient revenue profile anchored by our focused exposure to downstream high volume applications. This includes pharma QAQC, where growth is closely tied to manufacturing output and CapEx spending trends. Within these segments, customer spending has remained robust. Looking ahead, customer manufacturing needs continue to evolve with potential for additional investment driven by tariff related capacity shifts and US pharma reshoring initiatives.

Udit Batra
Udit Batra
President and CEO at Waters

Our team continues to execute well with our revitalized portfolio, particularly as the instrument replacement cycle continues to ramp. We also expect sustained contribution from our idiosyncratic growth drivers and continued achievement of strong like for like pricing gains. Given our better than expected first quarter performance, we are raising our full year constant currency sales growth guidance to five to 7% while adequately accounting for US policy developments in the academic and government end market. Our adjustment to A and G growth expectation represents a 50 basis point impact on our full year growth outlook. But incremental price accretion from tariff related actions is separately expected to contribute an equivalent 50 basis point tailwind.

Udit Batra
Udit Batra
President and CEO at Waters

As such, our growth assumptions for the rest of the year remain unchanged. I will now talk about the current tariff situation and how Waters is positioned to meet the challenges from recent global trade policy changes. Our manufacturing footprint is highly globalized, and it includes a strong existing US presence. A significant portion of our ex US manufacturing also takes place in jurisdictions subject only to the lower baseline tariff rate. We also do not have a significant tariff exposure to goods entering The US from China or vice versa.

Udit Batra
Udit Batra
President and CEO at Waters

After the tariffs were announced, we quickly stood up a cross functional task force to assess tariff exposure and implement mitigation plans. We rapidly assessed the impact of tariffs tariff exposure and implemented supply chain adjustments, selective church surcharges for tariffs, and limits to discretionary spending. Thanks to our swift and decisive actions, we are well positioned to limit the net impact of the newly announced tariffs to a modest 10,000,000 on our 2025 adjusted operating margin, effectively offsetting the majority of a 45,000,000 gross impact. Within our EPS, the combined resulting effect of tariffs and US policy changes is fully offset by favorable foreign exchange movements. As a result, there is no net impact to our original earnings per share guidance.

Udit Batra
Udit Batra
President and CEO at Waters

Reflecting our first quarter outperformance, we are raising our full year 2025 adjusted EPS guidance to a range of $12.75 to $13.05. This translates to approximately eight to 10% EPS growth or 10 to 12% on a constant currency basis. Now I will pass the call over to Amol to cover our financial results in more detail and provide further details on our guidance. Amol?

Amol Chaubal
Amol Chaubal
Senior VP & CFO at Waters

Thank you, Udup, and good morning, everyone. For the first quarter, we delivered sales of 662,000,000, up 4% on a reported basis and 7% in constant currency, placing us at the high end of our guidance range. Orders growth exceeded sales growth underscoring our strong momentum. By end market, pharma grew 8%, industrial grew 6%, and academic and government grew 3%. Pharma saw double digit growth in Asia and The Americas and 3% growth in Europe.

Amol Chaubal
Amol Chaubal
Senior VP & CFO at Waters

Industrial was led by Waters division, which grew high single digits driven by PFAS applications growing more than 90%. TA instruments continued to benefit from battery testing demand. With an academic and government, as Udit highlighted, China grew double digits as we continue to leverage our local market presence. Regionally, Asia grew 13% with China growing 5%, Americas grew 6%, and Europe grew low single digits. By product line, instrument sales grew 11% driven by mid teens growth in both liquid chromatography and mass spectrometry.

Amol Chaubal
Amol Chaubal
Senior VP & CFO at Waters

Recurring revenues grew mid single digits as expected given the two fewer days in the quarter. Customer activity remains strong and install base utilization remains high with our consistent results supported by our commercial initiatives in service plan attachment, e commerce adoption, and the launch of new bio separations columns. Overall, the first quarter execution was strong across markets, regions, product lines, and our resilient growth exposure positions us well for the remainder of the year. Now I will comment on our first quarter non GAAP financial performance. Earnings per share reached $2.25 coming in at high end of guidance supported by robust sales volume and an improvement in FX rates.

Amol Chaubal
Amol Chaubal
Senior VP & CFO at Waters

This represents 2% reported growth and 7% growth in constant currency. GAAP earnings per share were $2.03. Gross margin came in at 58.2%, and adjusted operating margin came in at 25.5% consistent with our expectations. Our operating tax rate for the quarter was 16% and our average diluted share count was 59,700,000.0 shares. Turning now to free cash flow capital deployment and our balance sheet.

Amol Chaubal
Amol Chaubal
Senior VP & CFO at Waters

First quarter free cash flow was 234,000,000 after funding 26,000,000 of capital expenditures. This represents 35% of first quarter sales and a free cash flow to adjusted net income ratio of 74%. Our strong free cash flow generation allowed us to rapidly deliver our balance sheet. In the first quarter, we reduced debt by approximately hundred and 70,000,000. Our net debt position is now approximately 1,100,000,000.0 returning to pre wired acquisition levels.

Amol Chaubal
Amol Chaubal
Senior VP & CFO at Waters

This results in a net debt to EBITDA ratio of roughly one times. We maintain a strong balance sheet, access to liquidity, and well structured debt maturity profile. This strength allows us to prioritize investing in growth. We continue to actively evaluate m and a opportunities that will enhance long term shareholder value. Additionally, we'll assess the potential resumption of our share repurchase program during the course of 2025.

Amol Chaubal
Amol Chaubal
Senior VP & CFO at Waters

Now I will share further commentary on our full year outlook and provide you with our second quarter guidance. Waters has a unique and resilient revenue profile anchored by our focused exposure to downstream high volume applications. Within these segments, the recovery in customer CapEx spending has remained robust. Additionally, manufacturing needs continue to evolve with potential for additional investments and new capacity driven by tariff related capacity shifts and US pharma reshoring initiatives, which is not included in our guidance. We continue to execute well with our revitalized portfolio, particularly as instrument replacement gains further momentum.

Amol Chaubal
Amol Chaubal
Senior VP & CFO at Waters

We also expect to sustain contributions from our idiosyncratic growth drivers and strong like for like pricing gains. We are raising our full year constant currency sales growth guidance to 5% to 7%, reflecting our better than expected first quarter performance while adequately accounting for the recent US policy developments in the academic and government end market. US AMG customers account for approximately 3% of our total revenue, making it a relatively modest part of our business. As part of our disciplined approach to forecasting, we have proactively adjusted our outlook for this segment by 15,000,000 to reflect recent market developments. While this adjustment represents 50 basis points to our full year growth outlook, incremental pricing accretion from tariff related actions are separately expected to contribute 50 basis points of tailwind.

Amol Chaubal
Amol Chaubal
Senior VP & CFO at Waters

As a result, our growth assumption for the remainder of the year remains unchanged. We are also raising our reported sales growth guidance to a range of 4% to 6%, reflecting our strong momentum in the first quarter plus recent tailwinds from FX rate assumptions. Turning now to the current impact of tariffs. As Udit outlined, we have acted swiftly to limit the net impact of the announced tariffs to a modest $10,000,000 on our adjusted operating margin for 2025. Approximately 80% of our gross 45,000,000 exposure relates to finished products manufactured in UK, Singapore, and Ireland for US operations, as well as raw materials imported to support US manufacturing.

Amol Chaubal
Amol Chaubal
Senior VP & CFO at Waters

The remaining 20% is tied to the trade between The US and China. Approximately 8,000,000 of our net exposure and 39,000,000 of our gross exposure relates to the second half of twenty twenty five. To respond quickly and decisively, we established a cross functional task force that immediately mobilized to assess risk, implement mitigation strategies, and safeguard our financial objectives. Thanks to the team's rapid actions, including targeted supply chain adjustments, selective surcharges, and disciplined discretionary spend management, we have substantially mitigated this impact. While incremental pricing actions related to tariffs help preserve profit, their impact on the reported margin percentage differs.

Amol Chaubal
Amol Chaubal
Senior VP & CFO at Waters

Accounting for the modest net impact of tariffs together with the incremental favorable benefit of foreign exchange rates, we now expect our full year 2025 gross margin to be approximately 59% and our adjusted operating margin to be approximately 31%. In both cases, this reflects a margin percentage that is roughly in line with our 2024 levels. Below the line, we now expect full year net interest expense to be approximately 40,000,000, reflecting better than expected debt pay down in the first quarter. Our guidance assumes average diluted share count remains at approximately 59,700,000.0 shares. We continue to anticipate full year tax rate of around 16.5% in line with last year.

Amol Chaubal
Amol Chaubal
Senior VP & CFO at Waters

Consequently, we are raising our full year 2025 EPS guidance to account for better than expected first quarter performance while absorbing the full impact of tariffs and US policy changes without any degradation to our prior earnings expectations. We now expect full year 2025 adjusted earnings per fully diluted share to be in the range of $12.75 to $13.05 inclusive of all tariff impacts. This is approximately 8% to 10% growth and 10% to 12% on a constant currency basis. Our guidance accounts for announced tariffs that are currently enacted and those scheduled for after the ninety day pause. Turning to the second quarter of twenty twenty five, we expect constant currency sales growth of 5% to 7%.

Amol Chaubal
Amol Chaubal
Senior VP & CFO at Waters

Net of currency translation, reported sales growth is expected to be in the range of 4% to 6%. For EPS, we anticipate our second quarter non GAAP earnings per fully diluted share to be in the range of $2.88 and $2.98. This represents approximately 10% to 13% reported EPS growth or 12% to 15% growth on a constant currency basis. With that, I will hand the call back to Udit for closing comments. Udit?

Udit Batra
Udit Batra
President and CEO at Waters

Thank you, Amol. So in summary, our first quarter results reflect excellent momentum and reinforce our confidence in both the recovery of the instrument market and the steady growth of our recurring revenues. We are executing from a position of strength anchored by resilient sources of growth and a revitalized portfolio that continues to command strong pricing. We remain firmly on track to achieve our twenty twenty five objectives despite the currently the the recently announced tariffs and no expected impact to our original EPS expectations for the year. Our commitment to operational excellence, financial discipline, and rapid execution continues to deliver solid outcomes and creates value for our shareholders.

Udit Batra
Udit Batra
President and CEO at Waters

We're energized by our progress, confident in our positioning, and immensely proud of our team who have been instrumental in achieving these strong outcomes. So with that, I will turn the call back to Casper.

Caspar Tudor
Caspar Tudor
Head, Investor Relations at Waters

Thanks, Udit. That concludes our prepared remarks. We are now happy to open the lines and take your questions.

Operator

We will now be thanking you and A. If you would like to ask a question, please use the raise your hand feature at the bottom of your screen. If you are dialed in by phone, press 9 to raise your hand and 6 to unmute. Please accept the prompt and unmute your audio when called upon. As a reminder, we are allowing one question and one follow-up.

Operator

We will wait a moment to allow the queue to form. Our first question will come from Jack Meehan with Nephron. Your line is open. Please go ahead.

Jack Meehan
Equity Research Analyst at Nephron Research LLC

Thank you. Good morning.

Udit Batra
Udit Batra
President and CEO at Waters

Good morning, Jack.

Jack Meehan
Equity Research Analyst at Nephron Research LLC

Good morning. Wanted to wanted to start talk a little bit more about the replacement cycle dynamics that you're seeing called out in the script that it's still ramping. Can you just talk about the different customer classes within pharma biotech, what you're seeing there? And then for Amol, within the 2025 guide now, is there any update to what your forecast was for instruments?

Udit Batra
Udit Batra
President and CEO at Waters

So, Jack, good morning, and, thank you. Look, instruments extremely strongly in in q one, came in ahead of expectations. Right? So double digit growth driven by both LC and mass spec growing in the mid teens. Now your question is around the replacement cycle in pharma in particular.

Udit Batra
Udit Batra
President and CEO at Waters

LC in pharma also grew in the mid teens, really, really strong growth. There, the growth was led by large pharma where I'll remind you that our focus is on late stage recur late late stage, resilient applications in QC, in manufacturing, and in and in the generic segment. So large pharma, genetics, and CDMOs, which is about 75% of our pharma business, all grew, in double digits. So the replacement cycle is well and truly underway. The funnel is quite strong, and our customers are really responding well, both in greenfield and brownfield opportunities to the Alliance IS making making a stake, building a stake there as well.

Udit Batra
Udit Batra
President and CEO at Waters

Amol, on the 2025 guide?

Amol Chaubal
Amol Chaubal
Senior VP & CFO at Waters

Yeah. And so the only change for the remainder of the year in our guide is mainly around The US A And G business. It's very small portion of our business, like 3%. What we've done is we've proactively, meaningfully de risked our US A and G forecast. So we've prudently assumed 20% decline for US A And G for the rest of the year, which brings our overall A and G for the full year to a mid single digit decline for the full year.

Amol Chaubal
Amol Chaubal
Senior VP & CFO at Waters

And that creates a 50 basis points top line headwind. Now separately, our selective surcharge actions on tariffs add about 50 basis points on the top line. And so for rest of the year, net of the two, there is no impact. So that's roughly the guide change.

Jack Meehan
Equity Research Analyst at Nephron Research LLC

Right. And as one follow-up, in the pharma biotech customer class, have you seen any change in behavior related to tariffs? Like, specifically, from what you can tell, was there any pull forward in the first quarter, or, have you seen any increase in ordering in the second quarter just around, you know, customers positioning around tariffs? Any color on that would be great.

Udit Batra
Udit Batra
President and CEO at Waters

So really no change in behavior, Jack, at all. Right? The funnels are are quite strong. I mean, we've seen momentum through the quarter, So really no change in behavior. And in in in terms of the tariff impact on on pharma itself, look, just like us, the pharma customers are spending time thinking through what actions they would take, if tariffs were implemented, on their products.

Udit Batra
Udit Batra
President and CEO at Waters

And just like us, they're thinking through supply chain modifications. And you must have read sort of the over hundred and 60,000,000,000 commitment that many large pharma players have made to reassure in The US. We're very well positioned with all of them. And if and then if and when that comes, we are sure to benefit from it. It's not included in our guide, but seeing absolutely no change on the replacement, on on the replacement dynamics in in large pharma in particular.

Udit Batra
Udit Batra
President and CEO at Waters

Now I just wanna take the opportunity also to take a step back. Right? We're getting caught up in sort of the small the the changes that are occurring every single day. The pharma industry remains one of the most attractive end markets. Look.

Udit Batra
Udit Batra
President and CEO at Waters

I've spent close to thirty years of my career, half of it in pharma and half of it, sort of serving pharma through the life science tools industry. And I can tell you, innovation has never been stronger. It is there to meet the needs of an aging population both in both on the acute and chronic side. So we feel very good about our position in in the in in serving the pharma industry as we together work to getting the benefits of this pioneering science to many, many, many customers in need. So very, very positive about the long term prospects of pharma, but in the short term, really no change in dynamics on the replacement cycle.

Operator

Our next question will come from Tycho Peterson with Jefferies. Your line is open. Please go ahead.

Tycho Peterson
Tycho Peterson
Managing Director at Jefferies Financial Group

Hey. Thanks. Congrats on that quarter. I wanna probe into price. I don't think I've ever heard you guys use, you know, pricing so much on an earnings call.

Tycho Peterson
Tycho Peterson
Managing Director at Jefferies Financial Group

So maybe talk a little bit about what you're expecting on pricing this year, where you're seeing the greatest ability to push price. And and are are you not at all concerned about pharma pushing back on pricing? I mean, that does seem to be one of the things they're talking about in response to tariffs is leaning on their own suppliers.

Amol Chaubal
Amol Chaubal
Senior VP & CFO at Waters

Yeah. So, look, I mean, q one, we did 200 basis points of like for like price. As you know, we don't include upsell in our price. Embedded in our previous guide and also in this guide is excluding tariffs, 200 basis points of like for like pricing gains. Now we are doing selective surcharges associated with tariffs, and they are going to contribute about 15,000,000 or 50 basis points incremental to this 200 basis points of like for like pricing gains, and that is embedded in our revised guide.

Udit Batra
Udit Batra
President and CEO at Waters

Right. And in

Udit Batra
Udit Batra
President and CEO at Waters

terms of your second part the second part of your question on pushback, from pharma, look, I mean, we've had very close collaboration with our customers. As far as the 200 basis points on innovative products is concerned, I mean, that's always, sort of welcome if you're introducing new products. As far as the tariff surcharge is concerned, that's been conversation that that's been conversations with one by one with customers, and we track the stick rate on a daily basis. And I would say between 80 to 90% customers have fully understood what we're trying to do. With 10%, you have to have a debate and explain the reasons why and what parts.

Udit Batra
Udit Batra
President and CEO at Waters

But we're very confident on both the 200 on the, on the product driven by the product differentiation and the additional 50 basis points that, is a surcharge due to the tariffs.

Tycho Peterson
Tycho Peterson
Managing Director at Jefferies Financial Group

Okay. And then a follow-up on India. You know, this has obviously been a nice growth driver. You've got, you know, some tailwinds, you know, heading into '26 with some of Glutide moving over there. How do you think about maybe longer term risks around that business, you know, with manufacturing moves, more onshoring?

Tycho Peterson
Tycho Peterson
Managing Director at Jefferies Financial Group

Do you think that that what you're seeing there is sustainable?

Udit Batra
Udit Batra
President and CEO at Waters

Yeah. It's a it's a good question, Tycho. Look, I mean, just like the innovative pharma industry, genetics have a strong role to play in relieving funding for reinvestment in innovation. And India has played a strong role in supplying genetics to the rest of the world. Like our large pharma custer customers, Indian genetics companies also have global footprints.

Udit Batra
Udit Batra
President and CEO at Waters

Right? And they're they're, in a very straightforward way, able to reshore in other geographies. None of them have initiated any of those discussions, but I think if if if at all there are tariffs, they will again look at the same levers that we have or or large pharma companies have, including supply chain adjustments, and we're we're ready and we have the best relationships with them, to help them navigate through it. Now that said, the results in India, again, were close to 20%, 20% constant currency growth, and we're extremely proud of the team in India that is taking our new innovative products and really embedding them in the generics value chain.

Operator

Our next question will come from Puneet Souda with Leerink. Please go ahead.

Puneet Souda
Senior MD at Leerink Partners

Hi, Udup, Amol, Casper. Thanks for taking my questions here. First one on the tariffs and supply chain realignment side. Can you elaborate on what's already completed and what remains to be in terms of supply chain realignment, terms of Wimslow, Singapore versus US, and what remains to be optimized? And then, you know, is is are the LCs and mass specs affected by the IP domiciling and transfer pricing issues that affect the API for the drugs, or are you largely not impacted from that?

Puneet Souda
Senior MD at Leerink Partners

And I have a follow-up. Thank you.

Amol Chaubal
Amol Chaubal
Senior VP & CFO at Waters

Yeah. So Puneet, a couple of things. I'd like look. Our gross impact is 45,000,000, and and most of that shows up in the second half of the year, primarily because in q two, you have some inventory. But our teams did an excellent job of bringing more inventory and stockpiling before the deadlines.

Amol Chaubal
Amol Chaubal
Senior VP & CFO at Waters

And that partly is also the reason why the cost associated with that was the drag on our q two gross margins. But then sort of second half is pretty clean and can be extrapolated into the future. Within that, if you say within the '45, roughly 15,000,000 is offset with surcharges. Roughly 14,000,000 is manufacturing cost actions, that are largely on a landing mode. I mean, the actions that we have embedded in our guide are pretty much on the landing mode at this point.

Amol Chaubal
Amol Chaubal
Senior VP & CFO at Waters

So we feel pretty comfortable there and roughly 6,000,000 is discretionary spend management. In terms of your other question on IP and so it does affect, right, because at the end of the day, where you are manufacturing, you have an IP there, so you are bringing the product into another domicile at a certain transfer price. You can't change those transfer prices very easily without sort of moving, the IP in the first place. So the 45,000,000 exposure that we outlined includes all of that impact in it. Again, there are more moves sort of planned that will go live at the beginning of next year, which will allow us to completely offset the impact as we go into '26.

Udit Batra
Udit Batra
President and CEO at Waters

So Puneet, just one embellishment to what Amol has said. Look, none of this stuff happens automatically. And and I think you're used to us reacting rather rapidly to to a changing and challenging environment. And many of you had the chance to meet our team at our investor day. I mean, these are folks who are extremely dedicated to assessing the problems on a daily basis.

Udit Batra
Udit Batra
President and CEO at Waters

We meet daily, developing solutions, and implementing them implementing them rapidly. And we continue that cadence on a daily basis, and I'm extremely thankful to the dedication of the team to be able to offset 35 out of the 45 gross gross 35,000,000 impact 45,000,000 impact that we saw for the full year.

Puneet Souda
Senior MD at Leerink Partners

That's great. Thanks for all the details. My follow-up is, I mean, Uda, you're indeed outperforming significantly versus the peers. And that comes to the differentiation of what Waters is, its products, the quality, and where it's situated in the pharma, servicing the pharma customers. I'm wondering, can you talk take a minute and talk about how the pharma customers in The US and and Europe versus the pharma customers in India are are thinking about in this macro environment?

Puneet Souda
Senior MD at Leerink Partners

I think the questions are still about the second half and the confidence of these pharma customers and your positioning there, that that helps you, you know, gives gives you the confidence to to raise the guide and and see outperformance in the second half as well. Maybe could you elaborate a bit on that? Because, obviously, we're not seeing this from the rest of the industry.

Udit Batra
Udit Batra
President and CEO at Waters

Puneet, thank you for the for the question and the opportunity to comment on this rather important topic. Look. Waters, as you as you know, it positioned extremely well downstream in high volume applications where regulations are key, and we've made that our home. We've been executing that executing in that domain extremely well. Now we're at the beginning of the replacement cycle, which helps our instrument growth, and you saw double digit instrument growth already in q one.

Udit Batra
Udit Batra
President and CEO at Waters

We're not seeing any slowdown in replacement discussions with our large pharma customers, our genetics customers, or our CDMO customers, all of which are continuing to grow in in mid teens. Right? So we grew, in pharma high single digit. These three segments are growing in the double digits. Right?

Udit Batra
Udit Batra
President and CEO at Waters

So driving the growth, and they're a large part of the story is the replacement, the replacement cycle. Now as you look at each of these different segments, I commented earlier as well, not only is the funnel strong, the conversations are extremely strong. And as they think about navigating the complex macro environment, they're talking to us about changing of their manufacturing footprint, different supply chain reconfigurations. And given our relationships with these customers, we stand to benefit from it. And that gives us the confidence to raise the full year guide given the outperformance, in q one.

Udit Batra
Udit Batra
President and CEO at Waters

Pharma is a large part of that story, and our downstream presence, our innovation, which is meeting these unmet needs, the focus on idiosyncratic growth drivers like ULP one testing, like the India Genetics outperformance, like the focus on biologics is all helping. So really excited about what we're seeing from our customers and their focus on ensuring that they play a strong role in getting safe medicines to people, and we have a strong role to play there.

Operator

Our next question will come from the line of Catherine Schultz with Baird. Your line is open. Please go ahead.

Catherine Schulte
Senior Research Analyst at Robert W. Baird & Co

Hey, guys. Thanks for the questions. Maybe just what are your expectations for China for the balance of the year? Are you seeing any hesitation in customer spend there? And then what are your latest assumptions for stimulus?

Udit Batra
Udit Batra
President and CEO at Waters

Good morning, Catherine, and thank you for the question. Look, China came in, ahead of expectations, around 5% growth for, for the first quarter. And this was driven by, a strong performance in stimulus related, stimulus related opportunities in the academic and government segment where we're benefiting from our wider distribution as well as, localized footprint and equally benefiting from RTA portfolio, which did extremely well in the battery testing arena. Right? So, AMG actually came in, came in double digits for, for China for the start of the year.

Udit Batra
Udit Batra
President and CEO at Waters

Now as we look at the balance of the year, we've assumed that China basically remained stable at a low single digit growth. So we've just taken it down from the 5% growth in q one. We've assumed that it is low single digit growth, and any wins in this in the balance of the stimulus would be considered upside. Right? So, basically, low single digit for the balance of the year even with a strong start, for the year.

Udit Batra
Udit Batra
President and CEO at Waters

So a bit of prudence built in there.

Amol Chaubal
Amol Chaubal
Senior VP & CFO at Waters

Yeah. I mean, q one was consistent. Right? Even if we exclude the stimulus, we were relatively flat. And we have a strong local presence that is executing really well on not just the stimulus, but the broader business which reflects in our overall number.

Catherine Schulte
Senior Research Analyst at Robert W. Baird & Co

Great. And then maybe a follow-up on reshoring is how do you think about that And, you know, how long after some of these capacity announcements do you typically see the demand start coming for your products? I know you said it isn't in 2025 guidance, but just curious, you know, how you think that pulls out from a cadence perspective.

Udit Batra
Udit Batra
President and CEO at Waters

So, Catherine, it's it's early days. I mean, these are just being announced. We're in close conversation with all our customers. Nobody yet has detailed plans on exactly what they're gonna do. And as they emerge, we expect to play a play a strong role given, that our focus is and it remains on late stage or marketed, marketed compounds, is where a lot of these capacity expansions will come to support existing products.

Udit Batra
Udit Batra
President and CEO at Waters

Right? So we feel very confident about our position, but it's early days. There's not a lot of detail on exactly where these manufacturing facilities will be put up across The US.

Amol Chaubal
Amol Chaubal
Senior VP & CFO at Waters

Yeah. And just having a service organization with the best NPS scores really puts us in a driver's seat. Right? Because they are part of all these conversations around tech transfers and site movements. But as Udit alluded, like, none of this has converted into orders.

Amol Chaubal
Amol Chaubal
Senior VP & CFO at Waters

None of this is in our guide.

Udit Batra
Udit Batra
President and CEO at Waters

And and Amol's point is an excellent one. Look. I mean, the service team is the first one to find out when you're opening up a new manufacturing site. Customers want to be sure that the software is appropriately, the methods are transferred appropriately, and the new products that they that the new instruments that they purchase, really have sync up with the software as well as with their other sites. So when if and when it starts, we will be one of the first to find out.

Operator

Our next question will come from Sung Ji Nam with Scotiabank. Please go ahead.

Sung Ji Nam
Managing Director, Senior Equity Research Analyst at Scotiabank

Hi. Thanks for taking the questions. I'll just ask one. It's a multiparter. On academic, especially US academic, obviously, it's a very small portion of your revenue, but could you remind us kind of what is the latest number for that, in terms of your exposure?

Sung Ji Nam
Managing Director, Senior Equity Research Analyst at Scotiabank

And then also, you know, curious kinda what you're seeing on the ground currently. Are you are are you actually seeing meaningful weakness, you know, from your customer base? And then lastly, with all the structural changes and, you know, structural changes that are being proposed, are there opportunities for Waters to kind of actually take advantage, you know, in terms of, you know, future opportunities in academic, especially in US academic? Thank you.

Udit Batra
Udit Batra
President and CEO at Waters

I'll start, and then I'll pass it on to Amol. Look. You're right. In in academia and government is the smallest end market for us, so we're not really reflective of exactly what's going on in that segment as many of our peers might be. The US portion of that is roughly three ish percent.

Udit Batra
Udit Batra
President and CEO at Waters

Now, ironically, the start to the year was was excellent. Right? That segment grew double digits, driven by PFAS testing and department of debt defense orders. Right? So started the year with a double digit growth, but as Amol pointed out in the in the prepared remarks, we've assumed a significant decline for the balance of the year.

Udit Batra
Udit Batra
President and CEO at Waters

Right? The year started with double digit growth, but for the rest of the year, we've said it's gonna go down by 20%. Amol, do you wanna build?

Amol Chaubal
Amol Chaubal
Senior VP & CFO at Waters

Yeah. No. I mean, look, q one was double digit growth for rest of the year. I mean, it's a full year 90,000,000 or rest of the year $70,000,000 business for us. So really small in grand scheme of things.

Amol Chaubal
Amol Chaubal
Senior VP & CFO at Waters

We've done a meaningful haircut of 15,000,000 to it, which is assuming the rest of the year is minus 20%. It's prudent. It's just derisking, and we'll see how it plays out.

Udit Batra
Udit Batra
President and CEO at Waters

Yeah.

Sung Ji Nam
Managing Director, Senior Equity Research Analyst at Scotiabank

Thank you.

Operator

Our next question will come from Brandon Couillard with Wells Fargo. Please go ahead.

Brandon Couillard
Brandon Couillard
Managing Director at Wells Fargo

Thanks. Good morning. Who did the PFAS business thing that really accelerate, you quite a bit here in the quarter, clocking in a new high up 90%. Is there any timing benefit in that growth rate? What are you assuming for the year?

Brandon Couillard
Brandon Couillard
Managing Director at Wells Fargo

And maybe just unpack, that acceleration a little bit for us.

Udit Batra
Udit Batra
President and CEO at Waters

Yeah. Yeah. So so really happy with the performance on PFAS testing, Brandon, and thanks for the question. Look. We're going from strength to strength.

Udit Batra
Udit Batra
President and CEO at Waters

I'll remind you that for the last two years, that business has grown 40% each year. So it's not a one quarter phenomena. And this quarter, it grew 90%, across the food and environmental segments, but also academia, especially in The United States. We did not see any semblance of a pull forward on that. Right?

Udit Batra
Udit Batra
President and CEO at Waters

Our Zivo TQ absolute, remains the the, instrument of choice, and, the funnel is extremely strong on the food and environmental side in in in in for the balance of the year, not just in The US, but in The in other geographies. And recently, the despite sort of move towards deregulation across many different segments, PFAS has the opposite, opposite trend going for it. Right? So on April 28, the EPA announced 21 measures to combat PFAS pollution. So this includes, of course, aligning, PFAS across many agencies, but in no small part, limiting the effluent, the effluent PFAS and effluents for metal finishers and, other, and other customers, and equally ramping up the development of testing methods to improve detection and strategies to address PFAS.

Udit Batra
Udit Batra
President and CEO at Waters

Right? So this is not a one time event, and we're seeing even more focus from the EPA, on implementing regulations and asking for even better detection methods. And the reason I went off went on that diatribe is to illustrate the need for the most sensitive instrument, in the industry, and that's where the TQ Absolute continues to do extremely, extremely extremely well.

Brandon Couillard
Brandon Couillard
Managing Director at Wells Fargo

Okay. That's helpful. And to follow-up, you know, the balance sheet's in great shape. Net debt's down to, you know, back where it was through Wyatt acquisition. What's your appetite for another billion dollar plus deal or maybe even something more transformative?

Brandon Couillard
Brandon Couillard
Managing Director at Wells Fargo

And do you expect the macro volatility to actually lead to more assets becoming available perhaps in more attractive valuations? Thanks.

Udit Batra
Udit Batra
President and CEO at Waters

So, Brandon, thanks for the question. Look. Wyatt is a poster child for an acquisition. The strategic fit has been excellent, and it's played out exactly like we thought. It has helped us build our bioanalytical business, which we which we want to continue to build on.

Udit Batra
Udit Batra
President and CEO at Waters

Second, we committed to taking light scattering, into QAQC. As of this morning, we announced that light scattering is now compatible. That is the wired instruments are compatible with Empower, which allows our customers, and many of whom have been talking to us about this, to take light scattering into QAQC, basically, haste. So this is a significant opportunity. Now don't ask me to quantify it.

Udit Batra
Udit Batra
President and CEO at Waters

I will not do it today. And we will look at the facts facts after they are, after they are, after the sales are consummated. But extremely excited about what we've seen with Wired. And, yes, if we find other acquisitions like Wired, there are several in the pipeline, and valuations have have become a lot more reasonable, we would we would go for it. But, again, as Amol has said many, many times, if the strategic fit and the financial financials don't make sense, we will resume our share buybacks.

Operator

Our next question will come from Vijay Kumar with Evercore ISI. Please go ahead.

Vijay Kumar
Senior Managing Director at Evercore ISI

Hi, Urik, Namo. Good morning, and thanks for taking my question. Congrats on a nice sprint here. Maybe on on instruments here. Q1, very pleased with double digit growth.

Vijay Kumar
Senior Managing Director at Evercore ISI

Your prior is in a guidance, I think, assume something like, you know, 4% to 5% to hit the midpoint of the guidance. Is your instrument outlook changing? How should we think about two q and balance of the year on on instrument growth?

Udit Batra
Udit Batra
President and CEO at Waters

So Vijay, good morning, and thank you for, the question. Yeah. I mean, great start to the year, with instruments, double digit growth, both LC and mass spec in the mid teens. When you look at the guidance for the balance of the year, look, we've raised it, but it's basically five to seven five to 7%. And the guidance philosophy has not really changed.

Udit Batra
Udit Batra
President and CEO at Waters

Recurring revenues basically taken the high end of the guidance, so six to 7%. And for the balance of the year, we don't see issues with the number of days in the quarter. Right? So it should land between 67%. In fact, there's an extra day in the in the fourth quarter, if I'm not wrong.

Udit Batra
Udit Batra
President and CEO at Waters

So six to 7% on the high end, bringing in the high end, which is 60% of the business. Instruments, we are still assuming roughly five ish percent. Right? In such a dynamic environment, we think we will get constructive as the year goes along. Right?

Udit Batra
Udit Batra
President and CEO at Waters

Great start. Good funnel. Both LC and mass spec doing well with the replacement cycle fully underway, new products making a difference, idiosyncratic road drivers doing, doing what they're supposed to do and and according to our prediction, but we still wanna have sufficient level of prudence in the guide. So we've assumed roughly four to 5% instrument growth for the balance of the

Amol Chaubal
Amol Chaubal
Senior VP & CFO at Waters

I mean, largely unchanged for rest of the year other than the meaningful downsizing of US AMG.

Vijay Kumar
Senior Managing Director at Evercore ISI

That that's helpful. Then maybe one one quick follow-up on on a more view. Share count assumptions went up a tad, versus prior guidance. Curious why why, you know, no buyback assumptions within the guide.

Amol Chaubal
Amol Chaubal
Senior VP & CFO at Waters

Yeah. I mean, it's net neutral versus the previous guide. We we took down our interest expense assumptions and we took up our share count assumptions. But when you net the two, it's net neutral on EPS.

Operator

Our next question will come from Matt Sykes with Goldman. Please go ahead.

Matthew Sykes
Matthew Sykes
Analyst at Goldman Sachs

Hi. Good morning. Thanks for taking my questions. Maybe just the first one, sort of a high level question for you, Udit. When you look at sort of the commercial exposure you have, it's clearly where you want to be in this current market environment.

Matthew Sykes
Matthew Sykes
Analyst at Goldman Sachs

But just given all the challenges we're seeing sort of more upstream in research, given your lower levels of exposure there, does this make you want to take advantage of the environment to perhaps invest a little bit more in upstream either organically or inorganically, or are you fairly content with, remaining sort of commercial for this time being just given the macro uncertainty?

Udit Batra
Udit Batra
President and CEO at Waters

I think, Matt, firstly, good morning. We're very happy with our commercial exposure as you, as you pointed out. And I think the fact that we have high volume applications in a in a recurring setting, which are regulated, I mean, plays to our strength. And there's a lot to do here. Right?

Udit Batra
Udit Batra
President and CEO at Waters

I mean, there's a lot more to do with the hand that we have rather than thinking about the hand we should have or we should get. So many examples. Right? I mean, this morning, we announced, that we're taking light scattering into QAQC with Empower. I mean, several of you asked that question, in in in the past, and we are finally here.

Udit Batra
Udit Batra
President and CEO at Waters

There's a lot more to do there. Right? We wanna we wanna continue to develop new products that go and, fit into QAQC with Empower as our primary highway to do so. When you look at instruments, right, I mean, I think back when I joined the company five years ago, people said, well, LC is a commoditized segment, especially for small molecules. Well, you introduce Alliance IS, customers respond to innovation.

Udit Batra
Udit Batra
President and CEO at Waters

Look at TQ Absolute. Right? I mean, the most sensitive mass spec in the in the industry, and that's benefiting, from the PFAS testing. So there's a lot to do where we are, and our focus remains squarely on high volume applications and equally not to lose focus on on battery testing, on clinical. There's a lot lot to do here, Matt.

Udit Batra
Udit Batra
President and CEO at Waters

So not really getting distracted with other other areas at this point.

Matthew Sykes
Matthew Sykes
Analyst at Goldman Sachs

Thank you. And then just to follow-up. Just on services, it came in a little bit lighter than what we were expecting. Is this just the natural output of just having very high instrument placement growth?

Amol Chaubal
Amol Chaubal
Senior VP & CFO at Waters

Yeah. I mean, look, we had two less days, so that accounts for roughly 2% lower growth. But then we also had lower purchases of parts from third party service providers, people who also service our instruments, and that was a little bit of the drag on our service revenue for the quarter.

Operator

Our next question will come from the line of Dan Arias with Stifel. Please go ahead.

Dan Arias
Dan Arias
Managing Director at Stifel Financial Corp

Thanks for the questions, guys. Udit, can you just touch on PA for the quarter? 1% growth was a bit lower than I think where the street was, but industrial was up. What are the moving parts that gets you from one to the other? And then what's going on from a product and customer standpoint?

Dan Arias
Dan Arias
Managing Director at Stifel Financial Corp

Then along those lines, what's the outlook on the cyclical side of the business for

Dan Arias
Dan Arias
Managing Director at Stifel Financial Corp

the year?

Udit Batra
Udit Batra
President and CEO at Waters

Look. Look. So so Dan, generally very pleased with with TA overall. Right? I mean, it's a heavy instrument business, so it can be quite lumpy.

Udit Batra
Udit Batra
President and CEO at Waters

But that said, we did extremely well on battery testing, especially out of China, which grew double digits. The US came in a bit lighter, than we had, than we had initially initially hoped, but that is basically timing of different orders. So really pleased with where the TA business is. And, again, this this morning, we announced a couple of new launches in the TA business focused on polymer testing, material testing, and equally on helping our battery testing customers. So very happy in general with that business.

Udit Batra
Udit Batra
President and CEO at Waters

I think it's just lumpy, and so you see it go up and down quarter on quarter. I wouldn't pay too much attention to it.

Dan Arias
Dan Arias
Managing Director at Stifel Financial Corp

Okay. Thanks for that. And just as a follow-up, and I realize this is getting pretty specific, but is there anything that you can say about mass spec in biopharma? And the reason I asked just because very clear that PFAS is helping LCMS pretty pretty significantly. So I'm just kinda curious what the market for instrumentation beyond LC looks like if you look at your core biopharma markets.

Udit Batra
Udit Batra
President and CEO at Waters

Yeah. It's a it's a great question, and and and thank you for the opportunity to comment on it. If you come up with a sensitive instrument that is easy to use and customers like it, of course, there are benefits in other segments. And the the drug metabolism segment is one such segment. But historically, Waters has not has a had a strong presence largely due to, due to limitations in our software.

Udit Batra
Udit Batra
President and CEO at Waters

We worked very hard on improving the Waters Connect software to make it simple to use, to make it, reliable, from a regulatory standpoint, and several customers are are testing that. And so we're starting to see some traction, in the DMPK segment both in large pharma, but equally in mid sized CROs. Right? And I will I will stop there, and not comment on it anymore, for competitive reasons. But that said, very happy with what the team's been doing in taking a highly sensitive instrument not just to for PFAS testing into into drug metabolism for pharma and also into clinical, where mass spec is starting to play an increasingly important role in diagnostic testing.

Operator

Our final question will come from Dan Brennan with TD Cowen. Please go ahead. Dan, your line is open. Please feel free to unmute.

Daniel Brennan
Managing Director at TD Cowen

Sorry about that. Can you hear me? Apologies. I think you got this question earlier, but just wanted to go back to it a bit if you could. Just what what what are you seeing from pharma now, like, as they contemplate possible tariffs later in the year?

Daniel Brennan
Managing Director at TD Cowen

Are they trying to accelerate orders now? Is that a benefit maybe in the first half of the year? I think you didn't see I think you said you didn't see any impact in the first quarter to Jack's questions. Just wondering if there's any kind of change in activity, what you're seeing from that customer base.

Udit Batra
Udit Batra
President and CEO at Waters

So, same as I said, Dan, earlier, no no change at all. Right? I mean, this is basically driven by the replacement cycle. The growth is driven by the replacement cycle, traction of Alliance IS, and we can go customer by customer, and seeing significant benefit benefit of our downstream presence. And that, of course, gets compounded if you look at our focus on on GLP one testing, look at generics, look at, the growth in in CDMOs.

Udit Batra
Udit Batra
President and CEO at Waters

So customers that are downstream that have high volume applications are continuing to, replace instruments. This is across generics, CDMOs, and pharma, which is over 75% of our of of our pharma sales. So no real no real pull forward, that we can see.

Daniel Brennan
Managing Director at TD Cowen

Great. And and then and

Daniel Brennan
Managing Director at TD Cowen

then just beyond the QAQ sort QAQC part of the portfolio, excuse me, because you talked about mid teens growth and the rest of pharma a little bit slower. Just what's what's happening, like, in discovery and development even though it's a smaller part of the business? Just wondering what you're seeing there. Thank you.

Udit Batra
Udit Batra
President and CEO at Waters

So continued pressure, Dan. I mean, like we also commented earlier, continued pressure on biotech, on drug discovery, and pharma research. And, I think these are segments probably that will recover down down the line, but for now, we see we see continued pressure on those segments. So drug discovery, pharma research, and CROs, all three are are still under pressure. But, again, I'll remind you that's less than 20% of our overall business, our overall pharma business.

Operator

And this concludes the q and a portion of the call. I will now hand it back to Casper.

Caspar Tudor
Caspar Tudor
Head, Investor Relations at Waters

Thank you, Leila. I will hand it over to Udit to deliver our closing remarks.

Udit Batra
Udit Batra
President and CEO at Waters

Thank you again for joining us on

Udit Batra
Udit Batra
President and CEO at Waters

the call today. We had a wonderful start to the year, thanks to the focus on downstream high volume applications driven by the momentum in the replacement cycle, game changing new products, as well as our idiosyncratic growth drivers. I wanna thank our team who has risen yet again to meet another set of challenges, solving problems on a daily basis, collaborating closely with each other and with our customers, coming up with creative solutions in real time, and implementing them with excellence. Thank you for supporting Waters and the indomitable spirit of our colleagues.

Caspar Tudor
Caspar Tudor
Head, Investor Relations at Waters

This concludes our call. We look forward to connecting with many of you at upcoming events and conferences.

Executives
    • Caspar Tudor
      Caspar Tudor
      Head, Investor Relations
    • Udit Batra
      Udit Batra
      President and CEO
    • Amol Chaubal
      Amol Chaubal
      Senior VP & CFO
Analysts
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Key Takeaways

  • Q1 revenue grew 4% reported and 7% constant currency, with instruments up 11% led by mid-teens growth in liquid chromatography and mass spectrometry and non-GAAP EPS of $2.25 at the high end of guidance.
  • Full-year guidance was raised to 5–7% constant-currency sales growth and $12.75–$13.05 adjusted EPS, absorbing a modest $10 million net tariff impact while preserving original earnings targets.
  • Key growth drivers included +90% PFAS testing sales, ~20% India revenue growth in generics and CDMOs, and over 50% sales growth of the Zevo TQ Absolute mass spectrometer.
  • Introduced new offerings such as enhanced Alliance IS HPLC configurations, the Electroforce Apex One and TGA SmartSeal pans in TA, and Empower software integration for multi-angle light scattering detectors.
  • Deployed rapid tariff mitigation measures—selective surcharges, supply-chain realignment and disciplined spend management—limiting the gross $45 million exposure to a $10 million net hit on 2025 operating margin.
AI Generated. May Contain Errors.
Earnings Conference Call
Waters Q1 2025
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