Waters Corporation Q1 2026 Earnings Call - Raised Full-Year Guidance on Synergy Execution and Acquired Business Turnaround

Operator: Good morning. Welcome to the Waters Corporation First Quarter 2026 Financial Results Conference Call. All participants will be in listen-only mode until the question and answer session begins. This call is being recorded. If anyone has objections, please disconnect at this time. It is now my pleasure to turn the call over to Mr. Caspar Tudor, head of investor relations. Please go ahead, sir.

Caspar Tudor, Head of Investor Relations, Waters Corporation: Thank you, Layla. Good morning, everyone. Welcome to Waters Corporation’s first quarter earnings call. Joining me today are Dr. Udit Batra, our President and Chief Executive Officer, and Amol Chaubal, our Senior Vice President and Chief Financial Officer. Before we begin, I will cover the cautionary language. In this conference call, we will make various forward-looking statements regarding future events or future financial performance of the company, including the financial and operational impact of Waters’ combination with the biosciences and diagnostic solutions business of Becton, Dickinson and Company, or BD. We will provide guidance regarding possible future results and commentary on the potential market and business conditions that may impact Waters Corporation over the second quarter of 2026 and full year 2026. These statements are only our present expectations and are subject to risks and uncertainties.

Please see the risk factors included within our Form 10-K, our Form 10-Q, our other SEC filings, 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 or in the appendix of the slide presentation accompanying today’s call. Unless stated otherwise, all organic revenue growth rates are presented on a constant currency basis and are in comparison to the first quarter of 2025. For acquired company revenue, unless stated otherwise, all results cover our period of ownership from the transaction closing date on February 9th, 2026, through to the end of the quarter.

For acquired company revenue growth rates, unless stated otherwise, all growth rates are presented on an estimated as reported basis covering the period of ownership in comparison to the prior year equivalent period that predates Waters ownership. 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. On today’s call, Udit will begin with our key messages and business highlights. Amol will review our financial results and outlook. We will open up the lines for questions. I’ll turn the call over to Udit.

Dr. Udit Batra, President and Chief Executive Officer, Waters Corporation: Thank you, Casper. Good morning, everyone. We delivered an excellent first quarter as a combined company, marking the start of a new powerful era of growth across our four divisions. We achieved double-digit organic growth in our legacy businesses, delivered meaningfully better than expected revenue for our newly acquired businesses, and grew adjusted earnings per share by 20%. We also took decisive steps towards building our new platform for sustained long-term growth, driving strong momentum and underpinning our raised full-year growth outlook. Before turning to the numbers, I want to recognize our teams for delivering this strong start to the year. They are enacting immediate operational improvements, continuing to deliver pioneering innovation and collaborating effectively to deliver revenue synergies already, all while ensuring a smooth transition from BD. It is a true privilege to work with my colleagues. I’m proud of what they have accomplished.

In the 1st quarter, total company as-reported revenue was $1.267 billion, comprising of $747 million of organic revenue and $520 million of Biosciences and Diagnostic Solutions following the February 9th acquisition closing date. Organic revenue grew 13% as reported and 11% in constant currency, exceeding the high end of our constant currency guidance range by approximately 200 basis points. Orders, again, outpaced sales. Biosciences and Diagnostic Solutions revenue exceeded guidance by $40 million and grew an estimated 7% on a reported basis versus the prior year equivalent period, a strong opening performance for these businesses under Waters’ leadership. On a full quarter pro forma basis, comparable revenue growth also exceeded expectations and improved meaningfully relative to 4th quarter trends.

Execution initiatives launched at the close, at closing drove flat year-over-year reported growth despite a $20 million headwind in respiratory testing due to the weak flu season. Excluding these impacts, growth was approximately 3% for the full quarter. With our strong top-line performance, combined with disciplined cost management and operational excellence across the organization, adjusted EPS grew 20% year-over-year to $2.70 per share, exceeding the high end of our guidance range by $0.35. Let me now cover these drivers of strength in more detail. Beginning with our organic revenue performance, the Analytical Sciences Division grew 12% in constant currency, with instruments up 8%, chemistry up 13%, and service up 14%.

In pharma, we grew mid-teens with sustained above-market performance supported by our unique exposure to idiosyncratic growth drivers. Continued strong instrument replacement and excellent adoption of new products in our high growth adjacencies. In academic and government, we grew high teens, driven by strength in Europe and broad-based demand for our revitalized high-resolution mass spec portfolio. In industrial, we grew low single digits, led by chemical analysis and continued momentum in PFAS testing applications. Thanks to the effective cross-divisional collaboration given our diligent integration planning, approximately 1 percentage point of Analytical Sciences growth was driven by tandem quadrupole mass spectrometry sales through the Biosciences channel, an early proof of revenue synergy realization. Within the Advanced Diagnostics Division, the clinical business unit previously reported within the Waters division grew 14% despite DRG weakness in China. Strength was led by double-digit growth in the Americas and Europe.

The Materials Sciences Division grew low single digits, reflecting solid performance across core industrial and high growth applications given present macro conditions. Turning now to our newly acquired businesses. The Biosciences Division delivered $230 million of revenue, representing 7% estimated growth on an as-reported basis from the closing date of the transaction to the end of the quarter. Flow Research and Flow Clinical both grew 7%, reflecting improved execution and increased commercial activity. Reagents grew low double digits while instruments remained pressured due to U.S. academic and government trends and ongoing China-related constraints, including export restrictions of high parameter products and lack of a localized product portfolio. Meanwhile, overall demand for our recently launched FACSDiscover A8 and S8 systems remained strong.

On a full quarter pro forma basis, Biosciences declined 1%, marking a significant improvement from the 10% decline in the fourth quarter of 2025. This inflection is further underscored by our ex-China growth, which was 4% for the full quarter. As we localize the China portfolio in the second half of this year, launch additional new products, and implement incremental new commercial actions as the year progresses, the business is poised for further acceleration throughout 2026. Within the Advanced Diagnostics Division, Diagnostic Solutions delivered $288 million of revenue, representing 8% estimated growth on an as-reported basis from the close date. Microbiology grew 10%, reflecting improved commercial momentum tied to the newly enacted KPI discipline ahead of our BACTEC FXi launch in blood culture.

On a full quarter pro forma basis, Diagnostic Solutions business grew 1%, a clear acceleration from the high single-digit decline in the fourth quarter of 2025. Excluding respiratory testing headwinds, growth was 6% for the full quarter, reaching mid-single digit underlying growth sooner than expected. At the divisional level, including the clinical business unit, Advanced Diagnostics grew 3%. Excluding these same respiratory headwinds, the Advanced Diagnostics division grew 7.5% for the full quarter pro forma basis, reflecting strong underlying momentum. This inflection was delivered even ahead of the full benefit of our commercial execution initiatives and new product launches. Despite a 2% China DRG-related headwind that will annualize into the baseline in the second half of the year, positioning the business for continued acceleration as we enter the back half of the year.

Less than 90 days post-close, we’ve already made notable progress after taking control of the Biosciences and Diagnostic Solution businesses, as is evident in our results. Immediately after the February 9th closing date, we launched a 180-day plan to reinvigorate growth centered on a focused set of rapid execution initiatives. Early results have been outstanding, driving a clear and meaningful step up in revenue performance relative to the pre-close performance trends. Our first priority was to instill focus, accountability, and urgency across our newly acquired businesses. We have since substantially increased the frequency and rigor of forecast and funnel reviews with deeper inspection of conversion rates, deal progression, and pipeline quality. This has driven greater visibility and transparency, faster decision-making, and improved commercial execution. In parallel, we have taken deliberate actions to increase commercial activity across the organization.

We have raised expectations around customer engagement, driving our sales team to spend more time in the field, getting in front of the customers, and increasing outbound activity. This has been reinforced with clear KPIs and daily management, resulting in meaningful increases in call volume, customer visits, and pipeline generation, which is driving stronger funnel trends and overall commercial momentum. Our second near-term priority under our 180 day plan is pricing discipline. We have deployed our experienced Waters pricing team across Biosciences and Diagnostic Solutions, where we have conducted a comprehensive pricing review and are establishing 2 new deal desks. We’re already seeing tangible results with pricing actions taken right away in the quarter, already beginning to augment revenue performance. In addition, we are actively reviewing reagent rental contracts and utilization data to identify commercial opportunities.

Within U.S. Diagnostic Solutions alone, our initial review of 1,600 contracts has identified approximately 700 that are currently out of compliance, representing a double-digit million dollar shortfall annually. We see meaningful opportunity to improve operational follow-through on these contracts in the quarters ahead. Our third near-term priority is to regain share in Flow Research. We have already approved and initiated actions to localize manufacturing of flow instruments in China to improve market access and reduce export complexity, addressing a key source of share loss. We intend to begin manufacturing key products in China for China, starting in the third quarter, which is already providing our team a strong impetus to begin competing for tenders that require local manufacturing. We’re applying the same playbook that has made our Analytical Sciences business a growth leader in China.

Flow, for flow research reagents, we are improving product availability and speed to customer by adjusting our distribution strategy, leveraging new channels, and mobilizing Waters’ existing distribution network. These actions are expected to begin resolving prior constraints that have impacted share beginning in the second half of this year. We remain the market leader in downstream high volume life science applications spanning LC-MS, light scattering, and precision chemistry workflows together with related service and informatics. In the first quarter, we launched our next generation micro flow LC chemistry columns with MaxPeak Premier technology, delivering up to 2x the sensitivity of traditional microflow columns for use in high throughput bio separations, DMPK, and omics applications. In light scattering, we also recently launched our omniDAWN multi-angle light scattering detector, which is an industry-first extended range detector for use in UPLC and meeting the rising throughput and resolution requirements of our customers.

These new product launches increase our degree of differentiation when serving large molecule applications in our attractive end markets. In microbiology, we recently announced that our next generation blood culture system, the BACTEC FXi, has received CE marking under the European Union’s In Vitro Diagnostic Regulation, representing a key milestone in our microbiology product roadmap and delivered ahead of schedule. BACTEC FXi is a groundbreaking new product that combines industry-leading automation, allows 60 sample loading, and offers a 3-hour faster detection time than the current generation BACTEC, which was launched over 1 decade ago. This system is now available in Europe and Japan. We’re pursuing additional regulatory approvals in other key global markets in the months ahead. In molecular, we recently received FDA clearance for our BD Onclarity HPV self-collection kit and BD Onclarity HPV assay, enabling at-home cervical cancer screening with extended genotyping for multiple high-risk strains.

This solution allows patients to collect their own sample at home, which is then analyzed in the lab using the BD Onclarity HPV assay, removing barriers to the screening access. Cervical cancer is highly preventable, yet remains significantly under-screened. Nearly one in four women in the U.S. is not up to date with cervical cancer screening, despite HPV being the primary cause of nearly all cervical cancers. Screening gaps persist due to access challenges, discomfort, and patient avoidance of pelvic exams. Self-collection directly addresses these challenges by offering a less invasive and more convenient alternative with a proven ability to increase screening participation. As the most comprehensive at-home cervical cancer screening tool available, we are empowered by a mission to remove these barriers that prevent individuals from receiving routine screening.

Our goals are aligned directly with the priorities established by the U.S. Department of Health and Human Services, which identified expanding at-home testing as a top public health priority last year. We have already begun to sign contracts with strategic partners as we bring this solution to market. Turning to the synergies. On cost synergies, we remain firmly on track to deliver our $55 million target for 2026, driven by organizational optimization, procurement savings, and network optimization with a clear line of sight to delivery. Since February ninth, we have moved quickly to enact our restructuring plan and are now in advanced stages of implementation. We expect these actions to improve cost efficiency by optimizing spans and layers, eliminating redundancy, and achieving a leaner, centralized cost structure as part of the integration.

The associated savings will hit the P&L beginning in the third quarter of this year. We’ve also activated our centralized spend control tower, increasing visibility into indirect spend and driving more disciplined procurement execution. These actions are enabling us to capture savings across key categories while improving control and accountability. At the same time, we’re also taking business-level cost actions separate from our synergy program and rightsizing cost in areas where there is clear opportunity to realign with the revenue base. Together with our growth outlook, these actions support solid margin progression in the second half of the year. Revenue synergies, as I mentioned earlier, we’re already ahead of plan. We have moved quickly to activate cross-selling across the combined commercial organization, leveraging the biosciences channel to drive incremental demand for mass spec in pharma clinical settings.

We expect further contribution as we continually scale these efforts throughout the year. As we progress through 2026, additional synergy levels will start to build across instrument replacement, service plan attachment, and e-commerce. In total, we remain well on track to deliver $50 million of expected revenue synergies this year. On instrument replacement, of the 22,000 ripe for replacement, 12,000 are BACTEC, with over 50% greater than 5 years old and over 25% greater than 10 years old. Since February ninth, we have accelerated the U.S. and European launch of BACTEC FXi by 3 to 5 months relative to the inherited business case, creating earlier revenue capture across the significant install base opportunity. On service plan attachment, we have completed the first-ever full coverage analysis of flow, microbiology, and molecular diagnostics installed bases.

Beginning this quarter, we are assigning these opportunities to account-level representatives supported by clear KPIs and our Waters service leadership team, an effort we expect to drive at least $20 million of incremental revenue over the next 5 years. On e-commerce, we have scaled our digital capabilities team in recent weeks. We now have more than 100 full-time employees in our e-commerce team at our global capability center in Bangalore. This investment is a key enabler of a future best-in-class e-commerce platform, strengthening our competitive position and driving increased customer adoption of digital ordering channels, which is a key synergy. Turning now to 2026 guidance and our value creation roadmap. We have begun 2026 with significant momentum driven by the instrument replacement cycle, our idiosyncratic door drivers, and accretion from our high growth adjacencies.

As a result, we are raising our full year 2026 organic constant currency revenue guidance to 6.5%-8%, reflecting our strong first quarter performance and embedding $15 million of expected revenue synergies from cross-selling of Mass Spec. For the acquired businesses, we now expect Biosciences and Diagnostic Solutions to generate approximately $3.035 billion of reported revenue in 2026, which includes $35 million of expected revenue synergy contribution tied to the vectors I just covered, including instrument replacement, service plan attachment, and e-commerce. Together, total 2026 reported revenue is expected to be approximately $6.405 billion-$6.455 billion based on latest FX rates. Turning now to EPS.

Given our strong first quarter results, updated FX assumptions, and the prudence embedded in our second half outlook, we are raising our full year adjusted EPS guidance by $0.10 to $14.40 per share to $14.60 per share, reflecting growth of 10%-11%. With our synergy levers now underway, we have an excellent platform for continued strong performance as a new powerful era of growth begins, unfolding in 3 phases over our midterm outlook. In phase 1, where we are today, the incremental performance at our acquired businesses is tied to immediate operational improvements, such as those outlined in our 180-day plan, together with early revenue synergies from cross-selling. The strong Q1 results give us confidence that this foundation is being built at speed.

In phase II, these operational improvements are then joined by our full first tranche of revenue synergy levers spanning instrument replacement, service plan attachment, and e-commerce. These are near-term, well-defined opportunities that are expected to begin contributing starting in the third quarter of this year. In phase III, the strategic power of this combination becomes most visible. New product launches in bio separations, taking flow into QC in bioanalytical characterization, and our new platform launches, such as rapid stability testing, are expected to add further incremental growth vectors as we increasingly leverage our joint capabilities. Each of these phases takes us further up the growth curve from the mid-single digit pro forma growth rate, where our full year guidance sits today, progressively upwards into the high single digits over the next several years.

This is very similar to what we have seen at our legacy Waters business over the last five years. At the same time, we expect to drive significant margin expansion augmented by our cost synergies and expect to achieve at least 100 basis points of adjusted operating margin expansion every year through the end of the decade. Together, this powerful equation yields a mid-teens adjusted EPS growth algorithm and one we are executing against with increased confidence. In summary, we are laser focused on delivering value through our execution and operational improvements, innovation launch excellence, and synergy realization. With this transformation already underway, this value creation journey is beginning now, and we are doing so at speed. With that, I will now turn the call over to Amol to cover our financial results and guidance in more detail.

Amol Chaubal, Senior Vice President and Chief Financial Officer, Waters Corporation: Thank you, Udit. Good morning, everyone. In the first quarter of 2026, we continued to deliver industry-leading growth. We delivered reported revenue of $1.267 billion, which was ahead of expectations. Momentum remained strong at Waters organically, and our newly acquired businesses delivered a strong start as our 180-day growth revitalization plan began to take hold. Organic revenue was $747 million, growing 13% as reported and 11% in constant currency, which was 200 basis points above the high end of our guidance range. Our newly acquired businesses delivered $520 million of revenue during our period of ownership, $40 million above guidance, and representing 7% estimated as reported growth versus the comparable prior year stub period. Importantly, performance was ahead of expectations on a full quarter pro forma basis as well.

As reported, growth for the full quarter was flat, improving notably versus the prior quarter and underscoring the strength of our execution and growth revitalization initiatives. Excluding $20 million of respiratory testing headwind, growth was 3% for the full quarter. By geography, as reported, revenue was $505 million in the Americas, $412 million in Europe, and $350 million in Asia. We effectively managed our supply chain and mitigated elevated freight costs, tariff costs, and inflationary pressures while continuing to invest for the long term. Total company adjusted gross margin was 54.7%, approximately 200 basis points better than expected. Adjusted operating margin was 23.6%, also approximately 200 basis points better than expected.

This reflects strong margin results in a dynamic macro environment and one achieved before the benefits of our cost synergies and broader cost actions start to flow through the P&L. Our operating tax rate came in at 15.6%, and net interest expense was $38 million. With our top line strength, disciplined cost management, and operational excellence, adjusted EPS grew 20% to $2.70. On a GAAP basis, we reported a diluted loss per share of $0.87, reflecting acquisition-related purchase accounting charges, including amortization of acquired intangibles and inventory step-up, as is typical following a transaction of this scale. Free cash flow for the quarter was $42 million outlay impacted by deal-related transaction costs and the timing of net cash settlement with BD. Turning to our results by operating segments.

The Analytical Sciences Division, which is our legacy Waters division, excluding the clinical business unit, delivered as reported revenue of $607 million, up 14% as reported and 12% in constant currency. In constant currency, instruments grew 8%, chemistry grew 13%, and service grew 14%. Instrument strength was broad-based across both LC and MS, driven by robust replacement activity and our idiosyncratic growth drivers across GLP-1s, PFAS, India generics, and biologics. Leveraging the Biosciences sales channel, we also achieved strong mass spec results in pharma clinical settings, as Udit outlined. Chemistry growth was again led by MaxPeak Premier and new products within bio separations, which have been a vertical success. Our service results reflect strong pull-through from recent expansion in service plan attachment levels. By end market, pharma grew 14%.

Non-pharma grew 8% as academic and government grew 18%, and industrial grew 3%. Within pharma, spending trends remained strong across ethical pharma, CDMOs, and Chinese biotech. Growth was broad-based with high single-digit growth in Americas and Europe. Asia grew nearly 30%, led by over 50% growth in China, low teens growth in India, and low teens growth in Japan. Within academic and government, growth was driven by strong spending trends in Europe and solid demand globally for our revitalized high-resolution mass spectrometry portfolio, including Xevo MRT and Xevo CDMS. In China, we continued strong capture of stimulus standard opportunities. Within industrial, Asia grew mid-single digits, Europe grew low single digits, and the Americas was flat. Growth was led by chemical analysis and PFAS applications. For PFAS, we sustained strong growth despite a tough prior year comparison, led by double-digit growth in both Europe and China.

The Biosciences Division, which represents the former BD Biosciences business, delivered as-reported revenue of $232 million, representing 7% estimated as-reported growth from the closing date to the end of the quarter versus the comparable prior year stub period. Reagents grew low double digits, while instruments remained pressured due to U.S. academic and government trends and China-related constraints such as lack of localized product portfolio. Overall, flow research grew 7%, and flow clinical grew 7%, with stronger commercial execution driving increased activity levels across both business areas. Within flow research, performance was led by reagents and strength in our FACSDiscover A8 and S8 instruments, particularly in Europe. Within flow clinical, ex-China grew 13%, while China declined 25% due to DRG headwinds. By geography, Europe grew over 30%, the Americas grew 10%, and Asia declined high teens led by China.

On a full quarter pro forma basis, Biosciences declined 1%, representing significant sequential improvement versus the fourth quarter trend tied to our commercial actions. On a ex-China basis, Biosciences growth for the full quarter was 4%. The Advanced Diagnostics Division comprises of the former BD Diagnostic Solutions business and the Mass Spec Diagnostics clinical business unit previously reported within Waters Division. Total as reported revenue for the division was $349 million. Diagnostic solutions delivered $288 million of as-reported revenue, representing 8% estimated underlying growth from the transaction closing date to the end of the quarter. The clinical business unit delivered $61 million of revenue, up 16% as reported and 14% in constant currency.

On a as-reported basis, microbiology revenue was $203 million, reflecting 10% underlying growth for the own period, driven by improved commercial momentum as our execution initiatives began to take hold. Ex-China grew low double digits, while China declined 12% due to DRG headwinds, which was better than expected. Molecular diagnostics and point of care revenue was $84 million, reflecting 2% underlying growth for the owned period. On a full quarter pro forma basis at the divisional level, Advanced Diagnostics grew 3%, which includes a 4.5% headwind from respiratory and a 2% headwind from China. The acquired diagnostic solutions business grew 1%, reflecting a significant improvement in growth versus fourth quarter trends. Growth for the full quarter was driven by microbiology, which grew 5%, led by high single digit ex-China growth.

Excluding the same respiratory headwind, Diagnostic Solutions grew 6%, setting us up well for the rest of the year as these headwinds are not expected to recur. The Materials Sciences Division delivered as-reported revenue of $79 million in the quarter, representing an increase of 6% as reported and 2% in constant currency. Growth was led by strength in high growth segments such as batteries and electronics testing, as well as aerospace. We saw continued momentum in electric vehicles and data center applications. This was partially offset by soft trends in core industrial applications such as chemicals and materials. I will share further commentary on our full year outlook and provide our second quarter guidance. Beginning with organic revenue, we have entered 2026 with significant momentum driven by instrument replacement cycle, our idiosyncratic growth drivers, and accretion from our high growth adjacencies.

We are raising our full year 2026 organic constant currency revenue growth guidance to the range of 6.5%-8%, reflecting our strong first quarter performance and embedding $15 million of expected revenue synergy contribution. We now expect foreign exchange translation to have neutral effect on organic sales, which translates to organic reported revenue of $3.37 billion-$3.42 billion in 2026. Turning to our acquired businesses, we now expect Biosciences and Advanced Diagnostics Division businesses to generate approximately $3.035 billion of revenue in 2026, which includes $35 million of expected revenue synergies. Together, total reported 2026 revenue is expected to be approximately $6.405 billion-$6.455 billion based on latest FX rates.

The restructuring actions tied to our cost synergies are taking place towards the end of the second quarter, together with business level cost realignment. This supports solid margin progression in the second half of the year. In addition, we have a range of operational initiatives in place to fully offset anticipated impact of elevated freight, raw materials and component costs due to ongoing conflict in the Middle East for the balance of the year. Together with our strong first quarter results, we now expect our full year adjusted EBIT margin to be 28.2% in 2026. Below the line net interest expense is now expected to be approximately $186 million. Given diligent work by our tax team, our full year tax rate is now expected to be approximately 16%, which we expect to persist in future years.

This translates to a full year 2026 adjusted earnings per fully diluted share of $14.40-$14.60, which is a $0.10 raise in our guidance range, reflecting our strong first quarter results, partially offset by incremental prudence embedded in our second half assumptions and updated FX rates. For the second quarter of 2026, we expect organic constant currency revenue growth of 6%-8%. Foreign exchange represents a headwind of approximately 0.5% at current rates, resulting in organic reported revenue guidance of $814 million-$829 million. We expect revenues from the Biosciences and diagnostic solutions businesses to be approximately $802 million in the second quarter of 2026, which represents approximately 2.5% reported growth.

Together, this results in a total reported second quarter 2026 revenue of $1.616 billion-$1.631 billion. Second quarter adjusted earnings per fully diluted share is expected to be in the range $2.95-$3.05, which is flat to 3.4% growth given the full burden of higher interest costs and newly issued shares and ahead of cost synergies and business-level cost action benefits that begin to flow through the P&L starting in the third quarter. Turning to our implied guidance assumptions for the second half of the year. Even with the full-year raise in organic growth guidance, our strong first quarter results and the second quarter guided midpoint of 7% implies a prudent 6% organic constant currency growth in the second half of the year.

This is deliberately lower than what was implied in our prior guidance as it further de-risks our back-half organic growth outlook. For the biosciences and diagnostic solutions, our strong first quarter performance and second quarter guidance also meaningfully de-risks our implied second-half outlook. Our second-half assumptions reflect a prudent growth rate of 1.5%, percentage points above our second quarter guidance, well supported by incremental commercial and operational actions already underway and a favorable prior year comparison. With that, I will now hand it back to Caspar.

Caspar Tudor, Head of Investor Relations, Waters Corporation: Thanks, Amol. That concludes our prepared remarks. We are now happy to open the lines and take your questions.

Operator: We will now begin Q&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 star 9 to raise your hand and star 6 to unmute. Please accept the prompt and unmute your audio when called upon. As a reminder, we are allowing analysts 1 question and 1 follow-up. Our first question will come from Tycho Peterson with Jefferies.

Tycho Peterson, Analyst, Jefferies: Hey, thanks. Maybe just starting with the guide here, you know, a number of moving pieces. Obviously the $40 million, you know, beat on the BD side. You’ve got, you know, the FX headwind you called out. You know, look, it looks like the base business is getting better by about $5 million on an organic basis. The $35 million in revenue synergies, though, can you maybe just touch on, you know, where you think those are coming from early? I know you gave a little bit of color, Udit. What’s captured on pricing? I know you kind of flagged that as maybe showing up a little bit earlier.

Amol Chaubal, Senior Vice President and Chief Financial Officer, Waters Corporation: I mean, look, on the revenue synergies, the first phase of revenue synergies is around things such as instrument replacement, service plan attachment, and e-commerce, and that’s what is embedded in that $35 million outlook. What’s not embedded in that guide is the pricing actions that we are taking. What’s not embedded in that guide is also how we’ve successfully neutralized the impact of tariffs on our legacy Waters business. What’s not embedded in that guide is the benefits of being more disciplined on our reagent rental contracts.

Dr. Udit Batra, President and Chief Executive Officer, Waters Corporation: Tycho, just building on that, the revenue synergies that Amol outlined, the 3 levers we’ve talked about in the past, what’s really new is the 180 day plan, right? We basically worked diligently to look at how we were doing funnel reviews, what the activity was in the field. In fact, in some cases, the weekly call rates have actually doubled, right? Especially in the U.S. Advanced Diagnostics Division. We also implemented pricing improvements with our deal desks both in Biosciences and Advanced Diagnostics. We’re looking at reagent rental contracts across the Advanced Diagnostics Division. Having looked at roughly 1,700 or so accounts, close to half of them are out of compliance, and that’s a double-digit, double-digit opportunity.

These will start to now play out in starting Q2. Finally, we’re localizing our portfolio in China, really using the same playbook that we did for the analytical solutions business, which has incredible growth this quarter, right? Really following that playbook. What’s not really incorporated is the 180-day plan, which is having quite an early impact.

Tycho Peterson, Analyst, Jefferies: Okay. For the follow-up, Udit, can you talk on microbiology? You know, obviously, there was a comp factor there, but, you know, 10% growth is notable. You know, upload double-digit ex-China. Just talk about, you know, your confidence in turning that business around. Obviously, the new BACTEC coming fairly soon. Yeah, maybe just talk about your confidence in recovery there.

Dr. Udit Batra, President and Chief Executive Officer, Waters Corporation: Tycho, maybe first just some contextual comments, right? Take a step back. I mean, Waters is focused on high-volume regulated applications, right? That’s what we’ve done throughout our existence. We take sort of leading brands, and then with smart commercial execution, really meaningful new products, deliver what we are seeing as industry-leading growth for our Analytical Sciences business, both growth and margins, right? We intend to do the same with microbiology, where the unmet needs are very significant. We’ve gotten off to a fantastic start. Microbiology has the same characteristics, high volume, regulated applications with significant unmet needs. Really great start, about 5%-6% growth, in spite of the DRG headwinds. As you go into the back half of the year, the baseline becomes easier.

The FXi launch, we’re very excited about. That should augment not just the revenue synergies for from instrument replacement, but the underlying business itself. Really exciting times and significant unmet needs that excites our team. Expect to see that business grow nicely.

Operator: Your next question will come from Patrick Donnelly with Citi.

Patrick Donnelly, Analyst, Citi: Hey, guys. Thanks for taking the question. Udit, maybe one on the core kind of legacy Waters instrumentation side. It seems like LC-MS, you had a pretty nice quarter. I know you called out pharma. It seemed like ACA gov actually improved a little bit. Can you just give a little more color on what you saw, how the biopharma conversations trended in the quarter? As well, just ACA gov, what you’re seeing there.

Dr. Udit Batra, President and Chief Executive Officer, Waters Corporation: Sure, Patrick. Look, first on instruments overall, LC-MS was high single digits yet again. The replacement cycle is still underway, contributing nicely, especially in the U.S. and in Europe. It’s augmented by the new products, Alliance iS, and now the Xevo MRT having a wonderful start, and chemistry doing a great job there as well. The idiosyncratic growth drivers, right? You see GLP-1 testing, focus on biologics, India generics, all contributing to the instrument growth rate. To your question on pharma itself, I mean, really pleased with what we see, right? To what I said to Tycho as well. We’re a downstream high volume regulated player, right? We’ve seen terrific trends there. We’ve brought new products into that space.

We’re seeing mid-teens growth overall, high single digits in Americas and in Europe, where ethical pharma is leading the charge with instrument replacement. In China, we saw over 50% growth driven by biotech, CDMOs, and emerging innovative large pharma companies that are homegrown in China. India continued its track with genetics. Feel extremely good about what’s happening in pharma, and that remains one of our strengths. Really sort of looking forward to what the rest of the year brings in that category.

Patrick Donnelly, Analyst, Citi: Okay, that’s helpful. Then maybe one on BD. You know, I guess in hindsight, now that you guys have been behind the curtain a little bit here for a few months, when you look back at the Q4 kind of underperformance, how much do you think was just kind of an air pocket as the transition of the management happened? You know, I guess what I’m asking is on the execution improvement versus the actual market improvement, what have you seen from Q4 to Q1, and then the expectations going forward? Thanks so much.

Dr. Udit Batra, President and Chief Executive Officer, Waters Corporation: Yeah. Yeah, look, I mean, as we’ve come into the ownership, we’ve seen tremendous collaboration with amongst the teams. The integration plans were put together across the BD teams and the Waters teams. It was in some ways an advantage to have time between announcement and close. That diligence really got the quarter, the owned period of the quarter off to a fantastic start, right? I mean, the diligence that you’ve seen with Waters in the past with really sort of focusing on high-quality funnels. I mean, our funnels look better than they ever have. The forecast accuracy improved as a consequence. We’ve implemented the pricing initiatives across the two new businesses. Really incredible transparency and collaboration on looking at reagent rental contracts and also the China localization piece.

The 180-day plan itself was put together in collaboration with the teams. To your question on air pockets, et cetera, it’s very difficult to judge such things. I mean, it was a declining business, you see an advantage of just giving it focus. What I’ll remind you is that these are two businesses that have leading brands, really sort of brands that define the category. They are in high-volume regulated settings, and our Waters playbook is very relevant there, and you’re seeing the impact of that.

Operator: Your next question will come from Vijay Kumar with Evercore ISI.

Vijay Kumar, Analyst, Evercore ISI: Great. Udit and Amol, thank you for taking my questions. Congrats on a nice trend and thanks for all the detailed disclosures in the presentation. That was really helpful. Maybe my first one on this BD exec performance in Q1. When I look at the full quarter reported growth for BD, it looks like it was flattish, but for the period owned under Waters, it was up 5%. Maybe just talk over this delta between the full quarter versus period owned. Was there any timing of shipments, those kind of things that aided performance under Waters ownership? Is this because of extra days?

I’m curious I think the prior guidance was, assume BD to grow, you know, maybe up low singles 2%. Has it changed at all?

Amol Chaubal, Senior Vice President and Chief Financial Officer, Waters Corporation: Yeah, I mean, look, when we put together our guidance, we factored in things such as there’ll be few extra days because of the quarter, but also few days when the situation will be disturbed during the close. That’s how we sort of prepared our guidance. The way the teams executed makes us feel really proud that, you know, things are working. The 180-day growth revitalization plan is starting to bear fruit, and that’s what sort of resulted in this significant $40 million beat. What we’ve done with that is we’ve sort of de-risked our second half of the guide, and makes it far more palatable.

We’ve sort of taken down sort of point of care in the second half of the year to not be at average, but significantly below average. That gives us a lot of room to outperform and puts us in a great spot for the remainder of the year.

Vijay Kumar, Analyst, Evercore ISI: Understood. Maybe my follow-up on, you know, given that you mentioned that days impact share. When you look at core Waters, the 11% organic, what was underlying organic X days? When you say back half is

Amol Chaubal, Senior Vice President and Chief Financial Officer, Waters Corporation: 6%. Is that for core organic or pro forma organic inclusive BD? You know, giving a comment on order strength, I’m curious on why back half couldn’t be better. Thank you.

I mean, look, the extra days benefit our recurring revenue and, roughly we had 4 extra days in terms of working days, and that brings about 4% more recurring revenue, which is roughly 2% more total revenue for the legacy Waters business. Even if you strip that out, I mean, chemistry grew 13 and service grew 14%, so both of them, even after you take out 4%, flying at a meaningfully elevated levels versus their historical performance, and that’s to do with how our teams are executing really well in the field. For the guidance perspective, our first half growth for the legacy business constant currency is roughly 9%, and we’ve de-risked the second half, 1, for the 4 or so extra less working days that we have in Q4.

2, just because of the current macro, right? The second half embedded constant currency growth guidance is roughly 6%. That puts us in a really solid spot because we’re not seeing any of that in our funnel. Funnel remains very strong and we continue to fly at the altitude that we are flying at. That gives us great confidence on the second half of the year.

Dr. Udit Batra, President and Chief Executive Officer, Waters Corporation: Yeah. Vijay, just to sort of conclude that thought, as you go into the remainder of the year, I mean, there’s fantastic momentum on the base business. There’s no two ways around it. The 180-day plan has sort of got off the acquired businesses to a great start. Remember, there’s a lower baseline already starting in Q2 with the respiratory headwinds gone. For the latter half of the year, there is no DRG sort of headwinds anymore as well. You augment that with new launches, BACTEC FXi, as well as the A7 in our Biosciences Division and the reagents, and the revenue synergies that start to play out as well. We are really sort of positive about the setup that we see for the balance of the year.

Operator: Your next question will come from Doug Schenkel with Wolfe.

Doug Schenkel, Analyst, Wolfe Research: Good morning, thank you for taking my questions. First, on competition, one, you know, I guess there’s 2 here. Udit, your team’s bringing a new level of discipline to the life science business. I’m just wondering if there’s been any notable competitive responses worth calling out. The second question is, you know, there’s 2 product areas where you are or will soon be competing with private equity-owned businesses. Generally speaking, how does competing with PE differ and, you know, does this create new opportunities for the business? Thank you.

Dr. Udit Batra, President and Chief Executive Officer, Waters Corporation: Yeah. Yeah. Excellent questions, Doug, and good morning. Look, on Waters itself and competition, I mean, I’ll repeat what I said earlier. We are diligent about being focused on high volume regulated settings, right? Where the drivers are very well understood and are consumption oriented, and that’s allowed us to outpace the market over the last several years. In those setups, I mean, we have leading brands. We had it with the legacy Waters business. Now we have it with Biosciences, which defines the flow cytometry category and reagents, and with the Diagnostic Solutions business with microbiology. We feel very good about the brands we’ve inherited, and we’re working hard on bringing the same execution discipline that has brought Waters to the top of the league table, both in growth and margins and free cash flow.

As we start, and your question to sort of, I think the microbiology business that’s been acquired by PE players, I mean, we think it’s gonna be quite rational in terms of pricing. We are a pricing leader in the categories we compete in because we bring in tremendous innovation into the markets, and we expect something similar from the PE players. Not worried. I mean, I think we are now in a position where, as a team, we’re more focused on unmet needs, on proof of principle of our new products, commercial execution, than anything else.

Operator: Your next question will come from Eve Kozlowski with Goldman Sachs.

Eve Kozlowski, Analyst, Goldman Sachs: Hey, thanks for taking my questions. Starting with the core business, can you talk through the mid-teens growth in chemistry? I think it’s well above the full year guidance that you previously gave of around 6%-7%. How durable is this growth moving forward, and what’s the updated guide for chemistry in the full year?

Dr. Udit Batra, President and Chief Executive Officer, Waters Corporation: Let me start, then Amol can talk through the guide. I mean, you can say nothing more than just being ecstatic about what we’re seeing with chemistry, right? I mean, this is a journey that started a few years ago when we took our R&D dollars and dedicated 70%-80% of them in bio separations. The steady stream of new products is driving growth, right? I mean, that’s what you saw in the latter part of the year last year. You see it now as virtually all new molecular entities, especially biologics, are first looking at Waters’ offering and then going elsewhere. We feel very good about where we stand.

As you look at the mid to long term, I mean, there is no reason to believe that all of this will not flow downstream. Chemistry on the mid to long term basis should now be instead of a 7% grower, a 9%-10% grower at least. I’ll let Amol comment on the balance of this year and our guide assumptions.

Amol Chaubal, Senior Vice President and Chief Financial Officer, Waters Corporation: Yeah. I mean, look, in Q2, there was a little bit of pull forward, which we outlined in our last year’s Q2 earnings call. In general, we’re being cautious given we had such an amazing double-digit growth in QC every quarter last year. We are sort of reducing the guide for this year to, like, 6.5% full year, just to be prudent. I mean, what we are seeing in Q1, 13% growth, that is real, and that we expect to continue. The only reason we are guiding at 6.5% is the baseline is pretty strong, and we’re being prudent.

Eve Kozlowski, Analyst, Goldman Sachs: Great. On the acquired asset, can you talk through the decision to localize the manufacturing in flow cytometry in China? How much of an investment does this represent? What’s the local competition like? How durable are some of the market growth drivers, like MNC pharma funding in the region?

Dr. Udit Batra, President and Chief Executive Officer, Waters Corporation: Yeah. I mean, look, Evie, thanks for the question, but let me start sort of at the highest level. I mean, pharma in China is doing extremely well. I think we talked about this several quarters ago. Roughly one-third of all biotech molecules that are licensed by large pharma now come from China. That has then helped the CDMO industry grow, and also is giving birth to sort of fully integrated, innovative pharma companies in China. Pharma for us in China grew over 50%, right? Behind these trends and strong execution. This sort of result was only possible because we have a fantastic team in China that insisted that we localize our portfolio in China to be available to customers across the board, and we did that first for Analytical Sciences business.

We intend to do the same for Biosciences, where at this point, not much of the portfolio is localized. We’re doing that at rapid pace. We have our own site in Suzhou, where we’ll start doing this. In Q3, you should start to see seeing the orders flow in from the localized portfolio. There is another headwind in China for the flow business, which relates to export controls, and there we’ve streamlined the process dramatically during integration planning and now since the close of the deal. In fact, we’ve seen the highest number of orders flow in in the last few days, ever since the ban went in place.

It’s the same playbook, Eve, that allowed the Analytical Sciences Division to now really set the standard for the industry’s growth in China, and we expect to do the same for Biosciences Division.

Operator: Your next question will come from Puneet Souda with Leerink.

Puneet Souda, Analyst, Leerink: Yeah. Hi, Udit and Amol. Thanks for my questions here. First one on pricing versus volume. Could you talk a bit about how much of the growth was driven by volume in the quarter? You talked quite a bit about pricing initiatives. Wondering, you know, if you could drill down a bit and just give us some volume growth metrics in the BD business. How sustainable is the pricing tailwind, just given the competition and the, let’s say, the microbiology business?

Amol Chaubal, Senior Vice President and Chief Financial Officer, Waters Corporation: Yeah. On the legacy Waters business, we did roughly a little over 200 basis points of price, and that’s consistent with how we’ve been performing for last few years. On the BD business, we did just about half a percentage of price, which is in line with how BD has been doing historically. That’s also what we’ve embedded in our full-year guide, nothing different from the historic performance. We do see a very meaningful opportunity to bring the BD business where our legacy Waters business is. As Udit outlined, we’ve already instituted to deal desk. We see tremendous areas of opportunity, not just in pricing, but also in tariff mitigation and also in reagent rental contract compliance. All those are opportunities we are pursuing, none of which are in our guide.

Dr. Udit Batra, President and Chief Executive Officer, Waters Corporation: Yeah. Just to sort of add one other comment on pricing. There are pockets already, Puneet, in the Bioscience and diagnostics where we see pricing similar to what we’ve been able to implement in the legacy Waters business. The reason we’re not putting it, embedding it into the guide is simply because we want to see that play out and be sort of pervasive across all geographies. Really good starting starting point, and I expect that to be an upside as we go through the year.

Puneet Souda, Analyst, Leerink: Got it. Then on the core, I mean, congrats on the momentum there. Wanted to get a sense of, in the LC-MS instrument replacement cycle, where do we stand? Are you seeing sort of a pull forward of that replacement cycle peak that I think you were expecting in 2027? Could we see that in 2026 now? Wanted to get a sense of where we stand in the replacement cycle.

Amol Chaubal, Senior Vice President and Chief Financial Officer, Waters Corporation: Yeah. I mean, the replacement cycle is going really well. As we outlined, right, I mean, it first started with large pharma, then the CDMOs stepped in. There are still some participants like the CROs and the Chinese branded generics and some of the biotechs that are still not replacing even when their fleets have significantly overaged. That gives us a good runway into 2027. Keep in mind, 2021, 2022 were very large instrument placement years, and those instruments then come up for replacement in 2029, 2030. One would say, "Hey, you may hit a bit of a air pocket as we go through 2028." That’s exactly where the reshoring dynamic plays out because a lot of reshoring placements would likely happen second half of 2027, all of 2028.

The setup is really good. We could move seamlessly from one instrument replacement cycle to another with the reshoring bridge in between.

Operator: This concludes the Q&A portion of the call. I will now hand it back to Caspar.

Caspar Tudor, Head of Investor Relations, Waters Corporation: Thank you, Layla. This concludes our call. We look forward to connecting with many of you at upcoming events and conferences.