Udit Batra
President and Chief Executive Officer 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've ended a very successful year at Waters. In end markets with sustainable growth drivers, we have revived our resilient business and are now focused on growing our portfolio. Despite higher comparables, we saw strong growth continue with an acceleration on a stacked basis as the year went on. The strength we've seen in our instrument portfolio is a positive indicator for the future as our new products have gained traction and this all supports the sustainable future growth we expect to see in our consumables and service.
Before summarizing the quarter and full year, let me start by thanking my colleagues around the globe who represented the indomitable spirit of Waters throughout 2021. We remain focused on supporting our customers and delivering exciting new products despite the challenging conditions of the pandemic. Achieving these results in a normal year would have been quite an accomplishment, but to do so while balancing the continued ups and downs of the pandemic with a major transformation and a new leadership team is indeed quite remarkable.
Now I'm turning to slide three. We have three messages. We have a resilient and attractive portfolio of instrument systems, chemistry, consumables and services in end markets that are supported by sustainable growth drivers. We've revitalized this core by engaging our customers progressing on a number of growth initiatives and continuing to innovate across our portfolio, while launching exciting new products. And now, we're focused on growth of our core business as well as accessing high volume applications in faster billing adjacencies.
I will now provide a brief overview of our fourth quarter and full year 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 financial outlook. We will then open up the phone line to take your questions.
Moving on to slide four. In the fourth quarter, our revenue grew 6% as reported and 8% on a constant currency basis, reflecting broad strength across our end markets and geographies with double-digit year-end demand for our instruments and continued growth in our recurring revenue products. This translates to a 7.5% two-year stacked CAGR for the quarter versus 2019 on a constant currency basis. For the full year, revenue grew 18% as reported and 16% in constant currency as we saw strong growth in 2021 across all our regions led by pharma and industrial end markets. This translates to a 7% two-year stacked CAGR for the year versus 2019 in constant currency. Our Q4 non-GAAP adjusted earnings per share was $3.67 per share, up 1% year-on-year and 7% stacked. Excluding the effect of our prior year COVID cost actions and FX, EPS grew 8% versus last year. For the full year, non-GAAP adjusted earnings per share grew 24% to $11.20 and 12% on a two-year stacked basis.
Now looking more closely at our top line results for the quarter on slide five in constant currency, first, by operating segment. The Waters division grew 7%, while TA grew 16%. By end market, our largest market category, pharma, grew 8%, industrial grew 7%, and academic and government grew at 5%. In pharma, we saw continued broad-based strength in sales across segments, geographies and applications. Biopharma and contract organizations grew well above 20%. In industrial, growth was led by our TA business, which saw strong global strength in thermal as well as microcalorimetry and biology. Within the Waters division, we saw broad demand for LC instruments across our geographies as well as our customers -- as well as our customer segments who continue to invest in new capital equipment.
Turning to academic and government, we saw an improvement with growth across most of our geographies into the year-end. We're actively revitalizing our relationships with KOLs, which is an integral part of achieving long-term success in academic and government. While it takes some time for us to regain traction, Waters has familiarity and a fan base amongst KOLs who have often used instruments throughout their careers. Just last week, I was talking with the head of a leading core lab at one of our -- one of the top medical institutions in the United States. He's worked closely with Waters for the better part of two decades to build our proteomics capabilities at this institution and currently has over 40 Waters LCs and 20 mass spec instruments from our company.
Moving now to our sales performance by geography. On a constant currency basis, sales in Asia grew 9%, with China up 13%, Americas, 8%, with US, up 8%, and Europe grew 5%. In China, we saw strong demand throughout the quarter, with growth led by contractors, biopharma and a strong recovery in clinical. We also saw strong growth in food testing and chemical assays. In the US, growth came from ongoing strength in our pharma and industrial end markets. In pharma, sales were strong in LC and mass spec, which combined grew in the mid-teens with chemistry up low double-digits. In industrial, our TA business saw strong instrument placement across applications, led by advanced materials, chemicals and battery testing.
In Europe, all end markets continued to grow, led by pharma and industrial, with food and environmental businesses, resulting in strong demand for our tandem quads. Meanwhile, pharma sales remained solid with growth led by large molecule applications. By product and services, customer demand for our instruments finished the year strong, continuing the trend of instrument growth that we saw throughout the year, while demand for recurring revenue products remained strong. Overall, instrument sales grew 12% for the quarter with the robust demand driven by our commercial execution and new product contribution.
In LC, Arc HPLC continued to see strong global growth in our core segments as demand continues to ramp. Meanwhile, our ACQUITY and Arc Premier instruments continued to see strong adoption driven by applications in large molecule and novel modalities such as mRNA. In mass spec, we saw growth in our high-end tandem quad portfolio led by Xevo TQ-XS, Xevo TQ -- and Xevo TQ-S micro. We also saw strong demand from our biopharma and CRO customers as well as for food safety applications. In our high-res mass spec portfolio, we saw the demand for cyclic with drug discovery applications. We're also encouraged by the early adoption of our new SELECT SERIES MRT time-of-flight platform with customers using it for biopharma, discovery and OMEX applications.
For recurring revenues, despite the quarter having six fewer days than the fourth quarter of 2020, chemistry sales grew 5% led by continued high utilization by our pharma customers. Our new MaxPeak premier columns continue to provide incremental growth for our chemistry business. This technology provides important benefits in separation and purification of mRNA, oligonucleotides, peptides and glycans, which is effectively answering the needs of our customers as they work with more complex molecules. Service grew 2% despite a tough double-digit comparison a year ago, with strong growth in both China and in India, which has been a theme throughout the year. Finally, TA had another great quarter with sales up 16%, led by strong growth in thermal analysis, microcalorimetry and biology. Demand for TA products continues to be strong in all regions with growth driven by advanced materials and chemicals, including batteries and electronics.
Looking now at our top line results for the full year on slide six. In constant currency, the Waters division grew 15%, while TA grew 25%. By end market, pharma grew 19% and industrial grew 15%, while academic and government came at 5% for the year. Pharma, which is our largest market, has grown 10% on a two-year stack basis driven by strong demand in our instruments and recurring revenues with strength in both large and small molecule applications. We've also seen ongoing strength in our industrial and applied market, which has grown 6% on a two-year stack basis, led by China as well as North America and Europe. In academic and government, which has been our slowest market to recover, sales in Europe and the US are close to pre-pandemic levels, while China has further in its recovery as university spending continues to be constrained.
By geography, Asia grew 19%, China growing 25%, Americas grew at 16% with the US growing at 14%, and Europe also grew 14%. For the full year, on a two-year stack basis, our three largest geographies, the US, China and Europe grew 6%, 7% and 8%, respectively. What is especially pleasing is that the demand is balanced across all geographies, including a robust recovery in the US. By products and services, instruments grew 23% for the year, chemistry 15% and service grew 9%. On a stacked basis, instruments grew 6%, chemistry 9% and service 6%, showing strong performance above our historical averages. The strength we've seen in our LC instrument portfolio throughout the year remains a positive indicator for sustainable future growth in consumables as well as service. Our growth in recurring revenues has also been supported by the progress we've made in e-commerce as well as delivering higher attachment rates and service. Given the global nature of our business, we are certainly not immune to the ongoing supply chain constraints and inflationary pressures, but we are proactively addressing these challenges, leveraging our global manufacturing footprint and working closely with our customers and suppliers.
Now moving on to slide number seven. We covered this in our Q3 earnings call and also at the recent JP Morgan conference, our initiatives across instrument replacement, service attachment, contract organizations, e-commerce and new product launch excellence have all been important components for us, regaining our momentum and delivering strong performance in 2021. We've continued to exceed expectations and milestones on these initiatives and believe that each has further runway not just in 2022, but in years beyond, providing an average incremental growth impact of roughly 100 basis points annually across the base business in the next two to three years as our transformation program is firmly on track.
Moving now on to slide eight, the strength of our business is being supported by instrument innovation with recent product launches that have revitalized our core. Waters continues to build on its robust base, deep customer relationships, and importantly, its highly technical team of scientists and engineers with deep understanding of our customers' problems to solve. For example, Arc HPLC, which was launched in 2020, allows customers to increase the performance and capabilities for their high-volume workhorse instruments without revalidating their existing methods. This is absolutely critical in compliant environments and helps us provide the benefits of newer technology to our customers, while ensuring backwards compatibility.
Meanwhile, our MaxPeak premier technology provides important benefits and applications, where sensitivity and reproducibility is key by virtually eliminating the metal binding affinity of compounds like mRNAs, oligonucleotides, peptides and glycans. On the instrument side, ACQUITY Premier is a UPLC that was custom-designed for biologics and novel modality applications, providing 100 times better detection sensitivity than non-premier instruments and a 50% reduction in peak tailing. Within our chemistry portfolio, MaxPeak premier columns, which also offer this high-performance surface coatings, have set a record in terms of uptake for new columns as this technology continues to be well received by our pharma customers.
Turning to our mass spec portfolio, one additional example of innovation is our SELECT SERIES MRT, which is our high resolution, multi-reflecting time-of-flight instrument that provides remarkable accuracy at high speed with outstanding clarity. This instrument is setting the benchmark in mass accuracy. Its high throughput is enabling large sample studies of proteins and metabolites, which previously would have taken too much time to conduct. Additionally, you may have seen our announcement this morning of what is this acquisition of Charge Detection Mass Spec technology, CDMS. CDMS overcomes limitations of conventional mass spec in characterizing, analyzing and quantifying complex large molecules. These investments will allow Waters to develop and commercialize CDMS technology to solve significant unmet needs in novel modality settings such as cell and gene therapy for drug development. With the discipline, my colleagues, Jon Pratt and Jianqing Bennett have brought into launches new products, have meaningfully grown in their contribution this year and with our product vitality index around 150 basis points -- up around 150 basis points to approximately 15% in Q4.
Turning now to slide nine. A key element of our informatics strategy is to provide customers with tools that help them better manage their workflows and achieve faster, easier results with high-quality compliant data. Last month, we extended our next-generation informatics platform, Waters Connect to our tandem quad mass spectrometers for core quantitation, starting with food testing. As any scientist who works in mass spec will tell you, current software across the industry is powerful, but designed to fit all purposes, and as a result, can be complicated and difficult to use. Our new software is built around the purpose and end market application for which it is being used, delivering on our key principle of providing advanced technology that is fast, robust and easy to use. It reduces review times by up to 50% compared to the current market-leading platform by allowing labs to meet their compliance and data integrity requirements.
The overriding benefit here is that analysts can reduce review time to a minimum, which is one of the largest bottlenecks in the lab. Improving workflows for quantitative LC-MS and mass spec data review is critical for our customers as it helps improve the throughput and efficacy. I spent time with our launch team last week, and the rollout has begun with food testing applications and we plan to extend it to other applications in the near future.
Now turning to slide 10. Let me turn to the critical problems in higher growth adjacencies that we identified this year and believe we can solve over time. First, in bio separations, we see an opportunity to take our chemistry expertise from small molecule separation and apply it to novel modalities and large molecule separation. Despite their rapid growth, there are significant challenges in characterizing and confirming the quality of these large complex molecules. Take mRNA as an example. The industry has a key unmet need of sustaining analytical control when measuring molecular integrity. Current practices for newer modalities like this are not as reproducible as desired because there is not enough precision. So, by advancing our biologic capabilities, we can unleash our chemistry expertise and our engineering expertise to better characterize and separate these molecules and then identify items such as process-related impurities and degradation that are critical in later-stage development and high-volume manufacturing. In this area, specifically, we're looking at bio separation solutions for mRNA and other nucleic acids, proteins and lipid nanoparticles as well as viral vector gene therapies and vaccines, and adeno-associated viruses.
Second, in bioprocess characterization. One of the key differences in bioprocessing versus small molecule processing is that once you define the manufacturing process, you're effectively stuck with it and cannot optimize it without completely revalidating the process because it is tied for the drug master file. By providing analytical techniques that are powerful enough to characterize the product sufficiently, we believe that we can overcome this barrier and separate the process from the product. This is a significant need in the industry and has the potential to be a very attractive market. Our partnership with Sartorius is a key step in this journey. And as we bring the processing power of LC-MS applying the BioAccord in a workflow that is simple, powerful and fast and can be easily used on-site by bioprocess engineers.
The third application is of LC-MS and diagnostics, where we need a fast unbiased detection of multiple biomarkers to enable early disease detection. We believe mass spec has a significant role to play here and we have already demonstrated a proof of concept with UK government in characterizing the SARS-CoV-2 virus with excellent sensitivity and selectivity leading to a lower false positive rate than many other techniques. In review, our strong fourth quarter results capped a very successful year for Waters with broad-based growth across our end markets and geographies. We sustained our momentum with strong two-year stack revenue growth throughout the year, with our transformation now embedded in how we operate. Our core business has been revitalized with growing contributions from innovative new products and initiatives. We are laser-focused on our commercial execution, the markets we serve remain in a healthy state and our regions have rebounded solidly from pandemic lows. Meanwhile, we see opportunities in higher growth adjacencies that will raise our exposure to faster growing market segments as we start to solve the critical problems we've identified over time.
With that, I'd like to pass the call over to Amol for a deeper review of the fourth quarter and full year financials as well as our outlook for the first quarter and the full year of 2022. Amol?
