Full Press Release Details
Caspar Tudor, Head of Investor Relations (508) 482-2429
Waters Corporation (NYSE: WAT) Reports First Quarter 2023 Financial Results
Milford, Mass., May 9, 2023 Waters Corporation (NYSE: WAT) today announced its financial results for the first quarter of
Sales for the first quarter of 2023 were $685 million, a decrease of 1% as reported and an increase of 3% in constant currency, compared to
sales of $691 million for the first quarter of 2022.
On a GAAP basis, diluted earnings per share (EPS) for the first quarter of 2023
decreased to $2.38, compared to $2.62 for the first quarter of 2022. On a non-GAAP basis, EPS was $2.49, compared to $2.80 for the first quarter of 2022. This includes a headwind of approximately 8% due to
unfavorable foreign exchange.
While the first quarter came in below our expectations, our results reflect a healthy
two-year stacked growth rate of 9.4%, and our end-markets are resilient, said Dr. Udit Batra, President & CEO, Waters Corporation.
Our team continues to execute well, and our revitalized portfolio has been further strengthened with the launch of Alliance iS, which we believe is the most significant innovation to hit pharma QA/QC labs in the past decade.
Dr. Batra continued, The acceleration of our growth strategy remains on track, with our pending acquisition of Wyatt Technology anticipated
to close in the second quarter of this year. The transaction is expected to deliver immediate growth and adjusted operating margin accretion to Waters and will increase our exposure to large molecule applications.
During the first quarter of 2023, sales into the pharmaceutical market decreased 7% as reported and 4% in constant currency, sales into the industrial market
were flat as reported and increased 3% in constant currency and sales into the academic and government markets increased 38% as reported and 45% in constant currency.
During the quarter, instrument system sales decreased 7% as reported and 3% in constant currency, while recurring revenues, which represent the combination of
service and precision chemistries, increased 4% as reported and 8% in constant currency.
Geographically, sales in Asia during the quarter were flat as
reported and increased 6% in constant currency (with China sales declining 4%), sales in the Americas decreased 1% (with U.S. sales declining 3%) and sales in Europe decreased 1% as reported and increased 3% in constant currency.
Unless otherwise noted, sales growth and decline percentages are presented on an as-reported basis and are the same as
the sales growth and decline percentages presented on a constant currency basis as compared with the same period in the prior year, each of which is detailed in the reconciliation of sales growth rates to constant currency growth rates in the tables
A description and reconciliation of GAAP to non-GAAP results appear in the tables below and can be found
on the Company s website www.waters.com in the Investor Relations section.
Full-Year and Second Quarter 2023 Financial Guidance
Full-Year 2023 Financial Guidance
The Company now expects
full-year 2023 organic constant currency sales growth in the range of 3% to 5%. Currency translation is expected to have minimal impact on full-year organic sales growth. The Wyatt transaction is expected to increase full-year reported sales growth
by approximately 2.5%. The resulting full-year 2023 reported sales growth is expected in the range of 5.5% to 7.5%.
The Company continues to expect
full-year 2023 non-GAAP EPS in the range of $12.55 to $12.75, which includes an estimated headwind of approximately 1% due to unfavorable foreign exchange. This also includes the impact of the Wyatt
transaction, which is expected to temporarily decrease full-year 2023 non-GAAP EPS by approximately 1%. The Company expects the transaction to become accretive to
non-GAAP EPS starting in the first quarter of 2024.
Please refer to the tables below for a reconciliation of the
projected GAAP to non-GAAP financial outlook for the full-year.
Second Quarter 2023 Financial Guidance
The Company expects second quarter 2023 organic constant currency sales growth in the range of 1% to 3%. Currency translation is expected to decrease
second quarter sales growth by approximately 1%. Assuming a mid-May close, the Wyatt transaction is expected to increase second quarter reported sales growth by approximately 1.5%. The resulting second quarter 2023 reported sales growth is
expected in the range of 1.5% to 3.5%.
The Company expects second quarter 2023 non-GAAP EPS in the range
of $2.52 to $2.62, which includes an estimated headwind of approximately 3% due to unfavorable foreign exchange. This also includes the impact of the Wyatt transaction, which is expected to decrease second quarter 2023
non-GAAP EPS by approximately 3%.
Please refer to the tables below for a reconciliation of the projected GAAP to non-GAAP financial outlook for the second quarter.
Conference Call Details
Waters Corporation will webcast its first quarter 2023 financial results conference call today, May 9, 2023, at 8:00 a.m. Eastern Time. To listen to the call
and see the accompanying slide presentation, please visit www.waters.com, select Investors under the About Waters section, navigate to Events & Presentations, and click on the
Webcast. A replay will be available through at least May 23, 2023, at midnight Eastern Time on the same website by webcast and also by phone at (888) 566-0474.
About Waters Corporation
Waters Corporation (NYSE: WAT),
a global leader in analytical instruments and software, has pioneered chromatography, mass spectrometry and thermal analysis innovations serving the life, materials and food sciences for more than 60 years. With more than 8,200 employees worldwide,
Waters operates directly in 35 countries, including 14 manufacturing facilities, and with products available in more than 100 countries. For more information, visit www.waters.com.
Non-GAAP Financial Measures
This press release contains financial measures, such as constant currency growth rate, adjusted operating income, adjusted net income, adjusted earnings per
diluted share and adjusted free cash flow, among others, which are considered non-GAAP financial measures under applicable U.S. Securities and Exchange Commission rules and regulations. These non-GAAP financial measures should be considered supplemental to, and not a substitute for, financial information prepared in accordance with U.S. generally accepted accounting principles (GAAP). The Company s
definitions of these non-GAAP measures may differ from similarly titled measures used by others. The non-GAAP financial measures used in this press release adjust for specified items that can be
highly variable or difficult to predict. The Company generally uses these non-GAAP financial measures to facilitate management s financial and
operational decision-making, including evaluation of the Company s historical operating results, comparison to competitors operating results and determination of management incentive compensation. These
non-GAAP financial measures reflect an additional way of viewing aspects of the Company s operations that, when viewed with GAAP results and the reconciliations to corresponding GAAP financial measures,
may provide a more complete understanding of factors and trends affecting the Company s business. Because non-GAAP financial measures exclude the effect of items that will increase or decrease the
Company s reported results of operations, management strongly encourages investors to review the Company s consolidated financial statements and publicly filed reports in their entirety. Reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the tables accompanying this release.
Cautionary Statement
This release contains
forward-looking statements regarding future results and events. For this purpose, any statements that are not statements of historical fact may be deemed forward-looking statements. Without limiting the foregoing, the words
feels , believes , anticipates , plans , expects , intends , suggests , appears , estimates , projects and similar expressions, whether in
the negative or affirmative, are intended to identify forward-looking statements. The Company s actual future results may differ significantly from the results discussed in the forward-looking statements within this release for a variety of
reasons, including and without limitation, risks related to the timing of the closing of the transaction, expectations or ability to realize commercial success after the transaction is complete, the impact of this transaction on the Company s
business, anticipated progress on Waters research programs, development of new analytical instruments and associated software or consumables, manufacturing development and capabilities, that the acquisition will result in an increase in the
indebtedness of the Company the repayment of which could impact the Company s future results, market prospects for its products and sales and earnings guidance; foreign currency exchange rate fluctuations potentially affecting translation of
the Company s future non-U.S. operating results, particularly when a foreign currency weakens against the U.S. dollar; current global economic, sovereign and political conditions and uncertainties,
including the effect of new or proposed tariff or trade regulations, changes in inflation and interest rates, the impacts and costs of war, in particular as a result of the ongoing conflict between Russia and Ukraine, and the possibility of further
escalation resulting in new geopolitical and regulatory instability, the United Kingdom s exit from the European Union and the Chinese government s ongoing tightening of restrictions on procurement by government-funded customers; the
Company s ability to access capital, maintain liquidity and service the Company s debt in volatile market conditions; risks related to the effects of the ongoing COVID-19 pandemic on our business,
financial condition, results of operations and prospects; changes in timing and demand for the Company s products among the Company s customers and various market sectors, particularly as a result of fluctuations in their expenditures or
ability to obtain funding; the introduction of competing products by other companies and loss of market share, as well as pressures on prices from competitors and/or customers; changes in the competitive landscape as a result of changes in
ownership, mergers and continued consolidation among the Company s competitors; regulatory, economic and competitive obstacles to new product
introductions; lack of acceptance of new products and inability to grow organically through innovation; rapidly changing technology and product obsolescence; risks associated with previous or
future acquisitions, strategic investments, joint ventures and divestitures, including risks associated with contingent purchase price payments and expansion of our business into or developing markets; risks associated with unexpected disruptions in
operations; failure to adequately protect the Company s intellectual property, infringement of intellectual property rights of third parties and inability to obtain licenses on commercially reasonable terms; the Company s ability to
acquire adequate sources of supply and its reliance on outside contractors for certain components and modules, as well as disruptions to its supply chain; risks associated with third-party sales intermediaries and resellers; the impact and costs of
changes in statutory or contractual tax rates in jurisdictions in which the Company operates as well as shifts in taxable income among jurisdictions with different effective tax rates, the outcome of ongoing and future tax examinations and changes
in legislation affecting the Company s effective tax rate; the Company s ability to attract and retain qualified employees and management personnel; risks associated with cybersecurity and technology, including attempts by third parties to
defeat the security measures of the Company and its third-party partners; increased regulatory burdens as the Company s business evolves, especially with respect to the U.S. Food and Drug Administration and U.S. Environmental Protection Agency,
among others, and in connection with government contracts; regulatory, environmental, and logistical obstacles affecting the distribution of the Company s products, completion of purchase order documentation and the ability of customers to
obtain letters of credit or other financing alternatives; risks associated with litigation and other legal and regulatory proceedings; and the impact and costs incurred from changes in accounting principles and practices. Such factors and others are
discussed more fully in the sections entitled Forward-Looking Statements and Risk Factors of the Company s annual report on Form 10-K for the year ended December 31,
2022, as filed with the Securities and Exchange Commission ( SEC ), which discussions are incorporated by reference in this release, as updated by the Company s future filings with the SEC. The forward-looking statements included in
this release represent the Company s estimates or views as of the date of this release and should not be relied upon as representing the Company s estimates or views as of any date subsequent to the date of this release. Except as required
by law, the Company does not assume any obligation to update any forward-looking statements.
Waters Corporation and Subsidiaries
Consolidated Statements of Operations
(In thousands, except per share data)
| Three Months Ended | ||||||||
| April 1, 2023 | April 2, 2022 | |||||||
| Net sales | $ | 684,674 | $ | 690,572 | ||||
| Costs and operating expenses: | ||||||||
| Cost of sales | 284,380 | 285,685 | ||||||
| Selling and administrative expenses | 181,956 | 157,475 | ||||||
| Research and development expenses | 42,691 | 40,472 | ||||||
| Purchased intangibles amortization | 1,479 | 1,673 | ||||||
| Acquired in-process research and development | 9,797 | |||||||
| Operating income | 174,168 | 195,470 | ||||||
| Other income, net | 1,388 | 170 | ||||||
| Interest expense, net | (10,383 | ) | (8,945 | ) | ||||
| Income from operations before income taxes | 165,173 | 186,695 | ||||||
| Provision for income taxes | 24,250 | 26,864 | ||||||
| Net income | $ | 140,923 | $ | 159,831 | ||||
| Net income per basic common share | $ | 2.39 | $ | 2.64 | ||||
| Weighted-average number of basic common shares | 59,023 | 60,580 | ||||||
| Net income per diluted common share | $ | 2.38 | $ | 2.62 | ||||
| Weighted-average number of diluted common shares and equivalents | 59,317 | 60,952 |
Waters Corporation and Subsidiaries
Reconciliation of GAAP to Adjusted Non-GAAP
Net Sales by Operating Segments, Products & Services, Geography and Markets
Three Months Ended April 1, 2023 and April 2, 2022
| Three Months Ended | Percent Change | Current Period Currency Impact | Constant Currency Growth Rate (a) | |||||||||||||
| April 1, 2023 | April 2, 2022 | |||||||||||||||
| NET SALES OPERATING SEGMENTS | ||||||||||||||||
| Waters | $ | 602,075 | $ | 613,156 | (2%) | $ | (23,206 | ) | 2% | |||||||
| TA | 82,599 | 77,416 | 7% | (2,619 | ) | 10% | ||||||||||
| Total | $ | 684,674 | $ | 690,572 | (1%) | $ | (25,825 | ) | 3% | |||||||
| NET SALES PRODUCTS & SERVICES | ||||||||||||||||
| Instruments | $ | 302,942 | $ | 325,222 | (7%) | $ | (11,185 | ) | (3%) | |||||||
| Service | 248,217 | 239,732 | 4% | (10,538 | ) | 8% | ||||||||||
| Chemistry | 133,515 | 125,618 | 6% | (4,102 | ) | 10% | ||||||||||
| Total Recurring | 381,732 | 365,350 | 4% | (14,640 | ) | 8% | ||||||||||
| Total | $ | 684,674 | $ | 690,572 | (1%) | $ | (25,825 | ) | 3% | |||||||
| NET SALES GEOGRAPHY | ||||||||||||||||
| Asia | $ | 253,081 | $ | 254,334 | $ | (16,399 | ) | 6% | ||||||||
| Americas | 246,421 | 248,837 | (1%) | (781 | ) | (1%) | ||||||||||
| Europe | 185,172 | 187,401 | (1%) | (8,645 | ) | 3% | ||||||||||
| Total | $ | 684,674 | $ | 690,572 | (1%) | $ | (25,825 | ) | 3% | |||||||
| NET SALES MARKETS | ||||||||||||||||
| Pharmaceutical | $ | 384,898 | $ | 415,772 | (7%) | $ | (15,554 | ) | (4%) | |||||||
| Industrial | 209,650 | 209,397 | (5,762 | ) | 3% | |||||||||||
| Academic & Government | 90,126 | 65,403 | 38% | (4,509 | ) | 45% | ||||||||||
| Total | $ | 684,674 | $ | 690,572 | (1%) | $ | (25,825 | ) | 3% |
Note: Two-year compound annual sales growth rate of 9.4% compares total as reported sales for the three
months ended April 1, 2023 and the three months ended April 3, 2021 after adding back the negative foreign currency exchange impact of $43 million during the two-year period.
Waters Corporation and Subsidiaries
Reconciliation of GAAP to Adjusted Non-GAAP Financials