Udit Batra
President, Chief Executive Officer & Director at Waters
Thank you, Caspar and good morning, everyone. Along with Caspar joining me on this morning's call is Amol Chaubal, Waters Senior Vice President and Chief Financial Officer.
We have reported another quarter of strong broad-based momentum across our portfolio and geographies. We first thank our over 7,000 colleagues around the globe, who represent the indomitable spirit of Waters. Our teams have remained focused on supporting our customers and developing and delivering exciting new products despite the continuing impact of the pandemic. September 1 marked one year since I joined the company and what a year it has been. I'm often asked what is different. I would first like to talk about what is the same because that is what is giving us the ability to compete more effectively. Our brand stands for deep scientific expertise, a clear understanding of our customers' challenges and courage to invest in game-changing innovation; this remains the same. What we have injected with our new leadership team is a stronger focus on execution, a sense of urgency and accountability. We are a work in progress but the trend is positive.
Now moving to Slide 3 which summarizes where we are on our journey. Firstly, we're sustaining our commercial momentum with another strong quarter delivering flat sales growth of 6%, showing solid business performance with minimal COVID tailwinds. Meanwhile, our commercial initiatives and strong traction of new products like premier columns and instruments and Arc HPLC were well-positioned to deliver market cost growth through 2022. Finally, preparing on this momentum by taking decisive steps and solving key problems that are present in higher growth adjacencies like biologics manufacturing.
I will now provide a brief overview of our third quarter operating results, as well as commentary on our end markets, geographies and technologies. Amol will then review our financial results in detail and provide comments on our updated financial outlook. We will then open up the phone lines to take your questions.
Moving now to Slide 4. In the third quarter, our revenue grew 11% as reported and on a constant currency basis, reflecting continued strength in our pharma and industrial end markets, with balanced demand for our instruments and recurring revenue products. This translates to a 6% stack CAGR for the quarter versus 2019 on a constant currency basis. Year-to-date, revenue has increased 21% with a constant currency tax CAGR versus 2019 also above 6%. Our top line growth resulted in Q3 non-GAAP adjusted earnings per share of $2.66, growing 23% year-over-year. Year-to-date, non-GAAP adjusted earnings per share have grown 39% to $7.54.
Looking more closely at our top-line results for the quarter on Slide 5 in constant currency, first, by operating segment. The Water division grew 9% while DA grew by 27%. By end market, our largest market category, pharma, grew 16%, industrial grew 9%, while academic and government declined by 11%. In Pharma, we saw a broad-based continued strength in sales across customer segments, geographies and applications. Specced [Phonetic] was both in small molecule and large molecule applications which both grew in mid-teens for the quarter. Industrial growth was regionally broad and led by our TA business which saw strong growth globally in thermal, microcalorimetry and theology.
Turning to academic and government which is about 10% of our business, continued strength in Europe was offset by softer performance in China and other regions.
Moving now to our sales performance by geography, on a constant currency basis, sales in the Americas grew 16%, with the U.S. growing 13%. Sales in Europe grew 8%. Sales in Asia grew 8%, with India over 40% and China sales were down 3%. Now to a bit of clarification on China; demand remains very healthy as does the execution of our initiatives. A shipment of approximately $12 million got delayed at an airport in the last few days of the quarter due to a third-party shipping issue and has been delivered in the first few days of the fourth quarter. Looking therefore at China orders for the quarter, this was up mid-teens year-over-year. So really no challenge from a demand perspective.
In the U.S., growth was led by a broad-based continued strength in our pharma and industrial end markets. In pharma, we saw strength across our instrument and chemistry portfolios. In Industrial, our Waters and TA businesses both saw strong growth. Europe demand remains robust across all end markets with continued strength in pharma, industrial and academic and government. For the quarter, India was our fastest-growing market, driven by very strong growth in instrument sales to our pharma customers. As you know, India is primarily a small molecule and generic market for export and this is indicative of continued strength in global pharmaceutical demand for small molecule drugs. At products and services, customer demand for our instruments remain strong after an impressive first half of the year, while recurring revenues also continued to see sustained growth.
Overall, instrument sales grew 10% for the quarter, driven by robust demand, our improved commercial execution, new product contribution and instrument replacement. In LC, the newly released Arc HPLC continued to see strong growth and uptake of our premier instruments, both Arc and acuity, especially for applications in novel modalities like mRNA and Biologics remain solid. The strength we are seeing in our LC instrument portfolio remains a positive indicator for sustainable future growth in consumables and service.
In mass spec, demand strength from pharma customers continued with strong demand for our single quad led by users for oligo and biologics purification as well as strength in our tandem quad used in late-stage product development. We're also encouraged by early interest in our Select Series MRT Time-of-Flight platform which delivered highest quality resolution at fast speeds.
Now for our recurring revenues, chemistry sales grew 13%, driven by an increase in utilization of our pharma customers, as well as strength in our industrial end markets. Demand for our new premier columns remains strong, while our e-commerce initiative is progressing and making it easier for our customers to do business with us. So far this year, our chemistry consumables have grown almost double digits when compared to our 2019 base. We're pleased that our premier technology is continuing to provide important benefits in separation and purification of mRNA and oligonucleotide molecules, given it's unique ability to reduce selective binding of plasmids and mRNA to various services. Service also grew double digits again this quarter even as last year's comps have become tougher. On a two year stack basis, service grew 7% in constant currency for the quarter and 6% year-to-date. By focusing on our value proposition and commercial execution, we have seen an increase in service plan attachment rates and plan renewals.
Finally, TA had a great quarter, with sales up almost 30% as demand has rebounded with strong growth across all regions. TA instrument sales have grown at 8% on a two year stack basis so far this year driven by strong demand for our thermal instruments used in the analysis of advanced materials, as well as microcalorimetry instrument demand for our pharma and academic customers.
Moving now to Slide 6. Let me now focus on why we believe that we will continue to deliver market class growth. I think you're used to seeing these initiatives, so let me use the same trend starting from the left-hand side of the slide. In 2021, we expect our instrument replacement initiative to deliver over $30 million in revenue. In 2022, we expect this to become over $40 million which means an incremental $10 million over 2021. Our focus on commercial execution is positively impacting our service business with planned coverage rates having increased by 2% so far this year compared to the first three quarters of 2019. In 2022, we think a further 100 basis points of expansion in service plan adoption is attainable.
Growth in e-commerce adoption also remains strong with chemistry sales through our e-commerce channels approaching roughly 30% versus the 21% we saw in 2019. We expect this to continue reaching over 35% by the end of next year. So far, this year, revenue from contract organizations has grown over 40% versus the comparable period in 2019. Next year, we expect the expect this to grow low double digits for the year versus 2021. And new products continue to do well. We are just taking the example of Arc HPLC and Premier to illustrate the point here. Both Arc HPLC and Premier continue to be strong drivers with over $45 million revenue expected from these sources of this year in and separate to the replacement initiative.
In 2022, we are expecting this number to be over $60 million. So in all, these initiatives alone should give us approximately 1% over our base business growth for 2022 which reaffirm our belief in market plus growth rates.
Moving now to Slide 7, we operate a strong core business in healthy and durable end markets. This strong foundation provides us a platform for solving critical problems facing our industry, where we can bring our scientific expertise and product portfolio capabilities.
I would like to say, there are three areas of focus which also happen to be in high-growth end markets. First, in the biologics arena on the reagent side and bioseparations. We believe there are significant problems to solve in separating and purifying these newer modalities, having a deeper understanding of reagents coupled with our chemistry expertise will allow us to solve these problems. Second, in bioprocessing, the largest challenge I felt as an engineer in bioprocessing versus small molecule processing was that once you define the process, you got stuck with it because it was in a drug master file. We have to decouple the process from the product. Separately, the process development time scales are longer versus small molecules, given the sheer complexity of attributes you need to measure. A simple and robust tool that can measure multiple attributes as a potential solution. We believe that the bio cohort is the right LCMS tool that can begin to address this challenge. Third area is diagnostics, where we need a fast unbiased detection of multiple biomarkers to enable early disease detection. We believe, again, mass spec has a significant role to play here.
Moving now on to Slide 8. Let me illustrate what I mean by sharing what we are doing to solve some of the key problems in bioprocessing. Last week, we announced a partnership with Sartorius, a leader in bioprocessing. We will combine our water Biocare system as a bioprocess analyzers with Sartorius amber bioreactors, giving scientists both faster and at line direct access to advanced quality characterization information. Scientists across Sartorius, Waters and some of our customers have already shown that the combined offering will shorten product development timelines considerably, taking what currently takes six weeks to analyze down to only two days. It also lays the foundation for using the BioCore as a bioprocess analyzer for process control and quality testing in the future. BioAccord is both versatile and easy to use and we expect that process engineers will be able to master it's operation within one to two weeks. In fact, one of our customers had summer interns use the BioAccord and gave raving reviews on how simple it is to use. I'm also an engineer who have been out of the last for many years and I was able to learn quickly.
Resulting configuration will allow direct analysis of bulk substance not just cell culture media, while targeting over 250 cell culture media analytics. Separately, we also announced a multiyear collaboration with the University of Delaware to develop technology for analytical characterization of manufacturing processes for biologics and normal modality. Through these partnerships, researchers from both Waters and the University of Delaware will identify and develop solutions that can provide better aseptic sampling, make sensor and analytical instrument improvements and develop data analytics and process control. This partnership will help us expand our capabilities to characterize biological manufacturing processes in order to drive improvements in quality, yield, efficiency and process control.
In summary, 2021 so far has been a very successful year for Waters. We are laser focused on our commercial execution. The markets we serve are in a healthy state and our geographic regions have rebounded solidly from pandemic lows. Meanwhile, I'm convinced of the great opportunity that lies ahead of us higher growth adjacencies to impact and deliver value by extending our scientific expertise and product portfolio towards helping customers solve the most complex problems in our industry.
With that, I'd like to pass the call over to Amol for a deeper review of third quarter financials and our outlook for the remainder of 2021. Amol?
