Q1 2024 Waters Corp Earnings Call

time. It is now my pleasure to turn the call over to Mr. Casper Tutor, head of investor relations. Please go ahead, sir.

Thank you, Ivy. Good morning everyone and welcome to the Waters Corporation First Quarter earnings call. Today I'm joined by Dr. Udhda Batra, Warder's President and Chief Executive Officer, and Amal Charbo, Wadr, Wadr's Senior Vice President and Chief Financial Officer. Before we begin, I will cover the cautionary language.

Good morning, welcome to the Waters Corporation first quarter 2024 financial results Conference call. All participants will be in a listen only mode until the question answer session begin. 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. Castro tutor head of <unk>.

I would like to first point out that our earnings release and the slide presentation supplementing today's call are available on the investor relations section of our website.

In this conference call, we'll make various forward-looking statements regarding future events or future financial performance of the company.

Castro: Bester Relations. Please go ahead Sir.

In particular, we will provide guidance regarding possible future results and commentary on potential market and business conditions that may impact Waters Corporation over the second quarter of 2024 and full year 2024.

Castro: Thank you Ivy.

Castro: Everyone and welcome to the Waters Corporation first quarter earnings call.

Castro: Today I'm joined by Dr. Barbara Walters, President and Chief Executive Officer, and the mall travel Walters Senior Vice President and Chief Financial Officer before we begin I will cover the cautionary language.

These statements are only our present expectations, and actual events or results may differ materially.

For more details, please see the risk factors included in our most recent annual report on Form 10K, our Form 10Qs, and the cautionary language included in this morning's earnings release.

Castro: I would like to first points out that our earnings release and the slide presentation supplementing today's call are available on the Investor Relations section Investor Relations section of our website.

Castro: In this conference call, we will make various forward looking statements regarding future events or future financial performance of the company.

During today's call, we all refer to certain non- GAAP financial measures, including in our discussions of the results of operations.

Castro: In particular, we will provide guidance regarding possible future results and commentary on potential market and business conditions that may impact waters Corporation over the second quarter of 2024 and full year 2024.

Reconciliation of the non- GAAP financial measures to the most directly comparable GAAP measures are attached to our earnings release issued this morning and in the appendix of our presentation, which are available on the company's website.

Castro: These statements are only our present expectations and actual events or results may differ materially for more details. Please see the risk factors included in our most recent annual reports on Form 10-K.

Unless stated otherwise, references to quarterly results increasing or decreasing are in comparison to the first quarter of fiscal year 2023 in organic, constant currency terms.

Castro: Form 10, Qs and the cautionary language included in this morning's earnings release.

In addition, unless stated otherwise all year-over-year revenue growth rates and ranges, given on today's call, are given on a comparable, organic, constant currency basis.

Castro: During today's call, we will refer to certain non-GAAP financial measures, including in our discussions of the results of operations reconciliations of the non-GAAP financial measures to the most directly comparable GAAP measures are attached to our earnings release issued this morning and in the appendix of our presentation, which are available on the company.

Finally, we do not intend to update our guidance, predictions or projections except as part of a regularly scheduled quarterly earnings release or is otherwise required by law.

Now, I'd like to turn the call over to UDET to deliver our key remarks, then Amor will provide a more detailed look at our financial results. After, we will open the phone lines to take questions.

This website.

Unless stated otherwise references to quarterly results, increasing or decreasing in comparison to the first quarter of fiscal year 2023, and the organic constant currency terms.

Do that.

Thank you, Casper, and good morning, everyone. We had a strong start to the year with sales coming in at the high end of our expectations, backed again by excellent operational performance.

Castro: In addition, unless stated otherwise all year over year revenue growth rates and ranges given on today's call are given on a comparable organic constant currency basis.

I want to begin today's call by thanking my colleagues for their continued focus on innovation and supporting our customers.

Castro: Finally, we do not intend to update our guidance predictions or projections, except as part of our regularly scheduled quarterly earnings release or as otherwise required by law.

These results reflect our drive to accelerate the benefits of pioneering science with our innovative portfolio.

Speaker Change: Now I'd like to turn the call over to <unk> to deliver our key remarks than a mall will provide a more detailed look at our financial results. After we will open the phone lines to take questions.

In the first quarter, market conditions were as expected with cautious customer spending and later than typical budget releases.

But as budgets opened up, we executed well with sales landing at the high end of our guide.

unknown: Thank you Kasper and good morning, everyone.

Speaker Change: We had a strong start to the year with sales coming in at the high end of our expectations backed again by excellent operational performance.

We also continue to deliver outstanding operational results.

Earnings were above our guidance and margins expanded, even with volume and FX headwinds.

Speaker Change: To begin today's call by thanking my colleagues for their continued focus on innovation.

This is a testament to our team, our resilient business model, and our operational initiatives.

Speaker Change: And supporting our customers. These results reflect our drive to accelerate the benefit of pioneering science with our innovative portfolio.

Waters is well positioned for future growth in our attractive secular and markets.

In the first quarter, we added to our revitalized portfolio with new products that serve high growth areas.

Speaker Change: In the first quarter market conditions were as expected with cautious customer spending and later than typical budget releases, but as budgets opened up we executed well with sales landing at the high end of our guide.

Turning now to our results. In the first quarter, sales landed at the high end of our guidance, declining 7% as reported, and 9% in organic constant currency.

Speaker Change: We also continued to deliver outstanding operational results.

Our non-gap earnings per share exceeded our guidance at $2.21. On a gap basis, EPS was $1.72.

Speaker Change: Earnings were above our guidance and margins expanded even with volume and FX headwinds. This is a testament to our team our resilient business model and our operational initiatives.

Outside of China, sales declined mid-single digits as expected.

Speaker Change: What does is well positioned for future growth and our attractive secular end markets in the first quarter, we added to our revitalized portfolio with new products that serve high growth areas.

In China, sales declined just under 30%, which was better than expected.

Growth remained weak as our prior year baseline does not reflect last year's deterioration in market conditions, which became more pronounced in the second half.

Speaker Change: Turning now to our results in the first quarter sales landed at the high end of our guidance declining 7% as reported and 9% in organic constant currency, our non-GAAP earnings per share exceeded our guidance at $2 and 21.

While instruments declined 25% overall, LC sales were slightly better than expected,

Instrument weakness was led by MassSpeck, particularly for ANG-related applications, which had a tough prior year comparison from global funding and a China stimulus.

Speaker Change: On a GAAP basis EPS was $1 72.

Speaker Change: Outside of China sales declined mid single digits as expected.

Wyatt delivered a 3% M&A contribution to sales. We continue to see strong synergy performance and traction for our recently launched products such as Zeta Start. Now I will talk more about our operational performance.

Speaker Change: In China sales declined just under 30%, which was better than expected.

Speaker Change: Growth remained weak as a prior year baseline does not reflect last year's deterioration in market conditions, which became more pronounced in the second half.

We believe the best reflection of good operational execution is effective margin management.

Speaker Change: While instruments declined 25% overall <unk> sales were slightly better than expected.

particularly when things slow down.

While facing significant headwinds from volume, fx, and inflation, we delivered yet another strong margin result. A gross margin expanded 40 basis points to 58.9 percent, and our operating margin expanded 20 basis points for the quarter to 27%.

Speaker Change: Instruments instrument weakness was led by mass spec, particularly for AMG related applications, which had a tough prior year comparison from global funding and the China stimulus.

Speaker Change: Why it delivered a 3% M&A contribution to sales we continued to see strong synergy performance and traction for our recently launched products such as data stock.

This was achieved through a combination of our operational management initiatives across pricing, productivity and proactive cost alignment.

Now I will talk more about our operational performance.

These initiatives position us well for resilience during lower volume periods and give longer-term opportunity when market conditions normalize.

Speaker Change: We believe the best reflection of good operational execution is effective margin management margin management, particularly when things slowdown.

You can see further evidence of our operational performance in our free cash flow.

Speaker Change: While facing significant headwinds from volume FX and inflation, we delivered yet another strong margin result, our gross margin expanded 40 basis points to 58, 9%.

We had an exceptional start to the year generating free cash flow of $234 million US dollars in the first quarter, which was 37% of sales. With our excellent free cash flow profile, we made rapid progress

Speaker Change: And our operating margin expanded 20 basis points for the quarter to 27%.

Speaker Change: This was achieved through a combination of our operational management initiatives across pricing productivity and proactive cost alignment.

in de-levering from the Wyatt acquisition as we approach its one-year anniversary.

We serve attractive secular end markets where testing volume plays a pivotal role in our business. This volume, which is correlated with global prescription consumption, is expected to accelerate in the future supporting our strong long-term growth outlook.

Speaker Change: These initiatives position us well for resilience during lower volume periods and give longer term opportunity when market conditions normalize.

Speaker Change: You can see further evidence of our operational performance and our free cash flow.

Our distinct advantage in downstream applications lies with our full ecosystem of products that complement our innovative instrument portfolio. In addition, we have strategically aligned with high growth opportunities that further enhance our core position.

Speaker Change: We had an exceptional start for the year generating free cash flow of $234 million.

Speaker Change: <unk> dollars in the first quarter.

Speaker Change: <unk> was 37% of sales.

Speaker Change: Excellent free cash flow profile, we've made rapid progress.

We had a busy quarter launching several new products that support a number of exciting high growth areas.

Speaker Change: In de levering from the via acquisition as we approach its one year anniversary.

Speaker Change: We serve attractive secular end markets. We're testing volume plays a pivotal role in our business. This volume, which is correlated with global global prescription and consumption.

At Analytica last month, we launched the Alliance IS Bio, a version of our groundbreaking next-generation liquid chromatography platform suited for biologics applications.

Speaker Change: Is expected to accelerate in the future supporting our strong long term growth outlook.

In the new HPLC system combines advanced bioseparation technology, bioinert surfaces, and built-in intelligence features.

Speaker Change: Our distinct advantage in downstream applications license with a full ecosystem of products that complement our innovative instrument portfolio. In addition, we have strategically aligned with high growth opportunities that further enhance our core position.

This helps biopharma QC analysts boost efficiency and eliminate up to 40% of common lab errors.

We believe that the Alliance IS is the most significant innovation to hit Pharma QAQC labs in over a decade. We're excited to bring this technology to routine testing applications for biologics.

Speaker Change: We had a busy quarter launching several new products that support a number of exciting high growth areas.

Supporting bios separations, we launched a new set of size exclusion chromatography columns called GTX Resolve Premiere.

Speaker Change: I'd analytical last month, we launched the alliance is.

Speaker Change: A version of our ground Big groundbreaking next generation liquid chromatography platform suited for biologics applications and the new HPLC. The new HPLC system combines advanced bio separations technology Bioaeronautics surfaces and built in intelligence features this helps biopharma QC analyst boost efficiency and eliminate up to.

These columns enable scientists to quickly assess aggregate content, integrity, and purity of larger biologic particles.

It covers modalities such as lipid nanoparticles, nucleic acids, and viral vectors and give scientists a significant improvement in sensitivity and sample consumption while accelerating run times.

40% ophthalmic ladders, we believe that the alliance is the most significant innovation to hit pharma QA QC labs in over a decade, we're excited to bring this technology to routine testing applications for biologics.

This launch supports the development of these modalities into downstream high-volume settings where Waters has critical instrument technology like LC, mass spec and light scattering, as well as highly innovative industry-leading software, chemistry and service.

Speaker Change: Supporting bio separations, we launched a new set of size exclusion chromatography columns called Gtx resolve premier.

To simplify the detection of PFAS, we launched Waters OASIS Dual Phase Analysis cartridges.

Speaker Change: These columns enables scientists to quickly assess aggregate content integrity and purity of larger biologic particles.

This consumable streamlined sample prep for PFAS workflows when detecting concentrations in water, soils, bios, biosolids and tissues.

Speaker Change: It covers modalities, such as lipid nanoparticles nucleic acids, and viral vectors and gift scientists a significant improvement in sensitivity and sample consumption, while accelerating run times.

It joins our comprehensive portfolio of solutions that support the surging demand for PFAS testing, which is a 300 to 350 US dollar million global market, growing 20% annually.

This launch supports the development of these modalities into downstream high volume settings, where waters has critical instrument technology like LC mass spec and light scheduling as well as highly innovative industry, leading software chemistry and service.

In an environment of increased scrutiny, the ability to accurately test for PFAS at very low levels is becoming a critical compliance need for a broad spectrum of industries.

Speaker Change: Simplify the detection of DFAST, we launched waters Oasis dual phase analysis cartridges.

A ZVOTQ absolute mass spec has leading sensitivity for detecting these anionic compounds. It can detect BFAS levels at as low as one part per quadrillion.

Speaker Change: This consumable streamline sample sample prep for DFAST workflows.

Speaker Change: When detecting concentrations in water soils biosolids and tissues.

Last month, in the United States, the EPA finalized an enforceable four parts per trillion limit of PFOA and PFOS in drinking water, which marks a significant regulatory milestone.

Speaker Change: He joins our comprehensive portfolio of solutions that support the surge in demand for beef as testing, which is a 300 to 350 million U S dollar million Mark global market.

Later this year, further regulations governing PFAS are expected across the globe. This includes the European Union where REACH proposed chemicals, regulation contemplates a PFAS ban on products manufactured as well as once imported.

Speaker Change: 20% annually.

Speaker Change: In an environment of increased scrutiny the ability to accurately desk for DFAST at very low levels is becoming critical becoming a critical compliance need for a broad spectrum of industries.

Speaker Change: As Evo <unk> absolute mass spec has leading sensitivity for detecting these anionic compounds. It can detect DFAST levels as low as one part per quadrillion.

In our TA business, we launched the Rio IS, which serves battery testing applications when used with our hybrid rheometers. This Rio impedance spectroscopy

accessory supports characterization of electrode studies which can lead to more efficient battery production.

Speaker Change: Last month in the United States, the EPA finalized an enforceable for box, but carillon limit of CFO and <unk> and drinking water.

I will now cover our 24 full year guidance.

Speaker Change: Which marks a significant regulatory milestone.

With our first quarter results, we remain on track to achieve our fullier revenue outlook, which is unchanged from our previous guidance at negative 0.5 percent to positive 1.5 percent growth in organic constant currency.

Speaker Change: This year further regulations governing be fast unexpected across the globe. This includes the European Union, where reach proposed chemicals regulation contemplates a <unk> band on products manufactured as well as ones imported.

We expect growth rates to improve over the remainder of the year and as our prior year comparisons, especially in China, get easier.

Speaker Change: In Rds in our VA business, we launched the REO ice which serves battery testing applications when used with our hybrid Z all meters. This real impedance spectroscopy.

We expect improving funnel activity to translate to orders as the year progresses.

With our strong operational performance, we expect to build leverage in our P&L despite the Flattish Revenue Guide and deliver 20 to 30 basis points of adjusted operating margin expansion while still reinvesting for growth.

Speaker Change: Accessories supports characterization of electrode studies, which can lead to more efficient battery production.

Speaker Change: I will now cover our 2020 for full year guidance.

Speaker Change: With our first quarter results, we remain on track to achieve our full year revenue outlook, which is unchanged from our previous guidance at negative 5% to positive one 5% growth in organic constant currency.

As a result, our adjusted EPS guidance is also unchanged at 0 to 3% growth in the range of $11.75 to $12.5.

Now I will pass the call over to Amul to continue covering our financial results in more detail and provide the rest of our guidance.

Speaker Change: We expect growth rates to improve over the remainder of the year and as.

Speaker Change: And as our prior year comparisons, especially in China get easier we expect.

Thank you, Uudh, and good morning everyone. In the first quarter, sales landed at the high end of our guidance range, declining 7% as reported, and 9% in organic constant currency.

Speaker Change: <unk>, improving funnel activity to translate into orders as the year progresses.

Speaker Change: With our strong operational performance, we expect to better leverage in our P&L. Despite the flattish revenue guide and deliver 20 to 30 basis points of adjusted operating margin expansion, while still reinvesting for growth.

As Uttit mentioned, end market dynamics were consistent with our expectations. Ex-China declined mid-single digits as expected, while China declined close to 30%, which was slightly better than expected.

Speaker Change: As a result, our adjusted EPS guidance is also unchanged at zero to 3% growth in the range of $11 75.

In organic constant currency by end market, pharma declined 6%, industrial decline 7%, and academic and government declined 30%.

Speaker Change: $12 five.

Speaker Change: Now I will pass the call over to a whole to continue covering our financial results in more detail and provide the rest of our guidance.

In pharma, sales outside of China declined low single digits as we executed well in this capex constrained environment.

Whole: Thank you and good morning, everyone in the first quarter sales landed at the high end of our guidance range declining, 7% as reported and 9% organic constant currency.

In China, sales declined almost 30% due to ongoing market challenges that are not reflected in our prior year baseline.

In industrial, food and environmental applications grew mid-single digits with continued strong growth in Bifacitated workforce globally.

Whole: As Luke mentioned and market dynamics were consistent with our expectations.

Whole: China declined mid single digits as expected, while China declined close to 30%, which was slightly better than expected.

We also saw strong growth in battery testing within our TA business, which has been a consistent growth theme.

Whole: Organic constant currency by end market pharma declined, 6% industrial declined 7% and academic and government declined 30%.

However, this strength was more than offset by weakness in core industrial applications, which are more cyclical. Our TA business declined high single digits overall, while chemical analysis declined high teams.

Whole: In pharma sales outside of China declined low single digits as we executed well in this capex constrained environment.

In academic and government, growth was weak against a 45% comparison as stimulus in China and elevated global funding in the prior year quarter draw lumpy spending patterns.

Whole: In China sales declined almost 30% due to ongoing market challenges.

Whole: Not reflected in a variety of lease life.

Whole: In industrial food and environmental applications grew mid single digits with continued strong growth in the first related workforce globally.

By geography, sales in Asia declined 16%. The Americas declined 8%, and Europe declined 3%.

Whole: We also saw strong growth in battery testing within our Ta business, which has been a consistent theme.

By products and services, instruments declined 25% with LC growth slightly better than expected.

Whole: However, this strength was more than offset by weakness in core industrial applications, which are more cyclical LTA business declined high single digits overall, while chemical analysis declined high teens.

Within recurring revenues, chemistry grew low single digits and service grew mid-single digits, both of which were affected by low activity levels in China.

The quarter had one fewer day versus first quarter of 2023, which translates to a growth headwin of approximately 1% for recurring revenues.

Whole: In academic and government growth was weak against a 45% in comparison, a stimulus in China and elevated global funding in the prior year quarter draw lumpy spending patterns.

Now I will comment on our first quarter non- GAAP financial performance versus the prior year.

Whole: By geography sales, we make sure declined 16% the Americas declined 8% and Europe declined 3%.

Despite headwinds from lower sales volumes, FX, and inflation, our team continued to respond to these challenges with resilience and commitment.

Whole: By products and services instruments declined 25% with LC growth slightly better than expected.

Our focus on operational excellence with pricing, productivity and proactive cost alignment.

Whole: Within recurring revenues chemistry grew low single digits and service grew mid single digits, both of which were affected by low activity levels in China.

allowed us to deliver first quarter gross margin of 58.9% an expansion of faulty basis points and first quarter adjusted operating margin of 27% and expansion of 20 basis points.

Whole: The quarter had one fewer b versus first quarter of <unk>, 23, which translates to a growth headwind of approximately 1% for recurring revenues.

Our effective operating tax rate for the quarter was 14.3% and our average share count was 59.4 million shares. Our non-gap earnings per fully diluted share were $2.21.

Speaker Change: Now I will comment on our first quarter non-GAAP financial performance versus the prior year.

Speaker Change: Despite headwinds from lower sales volumes FX and inflation our team continued to respond to these challenges with resilience and commitment and our focus on.

On a gap basis, earnings per fully deleted share were $1.72.

A reconciliation of our gap to non-gap earnings is attached to this morning's press release and in the appendix of our earnings call presentation.

Speaker Change: Operational excellence with pricing productivity and proactive cost alignment allowed us to deliver first quarter gross margin of 58, 9% an expansion of 40 basis points and first quarter adjusted operating margin of 27% an expansion of 20 basis points.

Turning now to free cash flow capital deployment on our balance sheet. We define free cash flows as cash from operation, less capital expenditures and excludes special items.

In the first quarter of 2024, free cash flow was $234 million after funding $29 million of capital expenditures, which is approximately 37% of sales.

Speaker Change: Our effective operating tax rate for the quarter was 14, 3%.

Speaker Change: Share count was $59 4 million shifts.

Speaker Change: Our non-GAAP earnings per fully diluted share were $2 21.

We maintain a strong balance sheet, access to liquidity, and well-structured debt maturity profile. This strength allows us to prioritize investing in growth, including MNA and returning capital to shareholders.

Speaker Change: On a GAAP basis earnings per fully diluted share were $1.72. A reconciliation of our GAAP to non-GAAP earnings is attached to this morning's press release and in the Perm.

We continue to evaluate MNA opportunities that will meaningfully accelerate value creation.

Speaker Change: <unk> of our earnings call presentation.

Speaker Change: Turning now to free cash flow capital deployment and our balance sheet.

At the end of the quarter, our net debt position further declined to 1.7 billion, which is a net debt to a bidda ratio of about 1.8 times. This reflects a decrease of approximately 300 million as we delivered the wire acquisition.

Speaker Change: Define free cash flow as cash from operations less capital expenditures and excludes special items.

Speaker Change: In the first quarter of 'twenty 'twenty four free cash flow was $234 million. After funding 29 million of capital expenditures, which is approximately 37% of sales.

As previously disclosed, our share buyback program has been temporarily suspended to enable us to pay down debt in KERDAS part of the WIAT acquisition last year.

Speaker Change: We maintain a strong balance sheet access to liquidity and well structured debt maturity profile.

We will evaluate the resumption of our share repurchase program throughout 2024 as part of our balanced capital deployment objective.

Speaker Change: This strength allows us to prioritize investing in growth, including M&A and returning capital to shareholders.

Speaker Change: We continue to evaluate M&A opportunities that grew meaningfully accelerated value creation.

Now I would like to share further commentary on our full year outlook and provide you with our second quarter guidance.

Speaker Change: At the end of the quarter, our net debt position further declined to $1 7 billion, which is a net debt to EBITDA ratio of about one eight times.

We expect to see an improvement in sales growth over the course of 2024 as prior year comparisons, particularly in China, become easier and as improved funnel activity translates to orders.

Speaker Change: This reflects a decrease of approximately $300 million as we believe the <unk> acquisition.

Our full year guidance is unchanged with 2024 organic constant currency sales growth expected between negative 0.5% and positive 1.5%.

Speaker Change: As previously disclosed our share buyback program has been temporarily suspended to enable us to pay down debt incurred as part of the wild acquisition last year, we will evaluate the resumption of our share repurchase program throughout wintergreen before as part of our balanced capital deployment objective.

At current exchange rates,

Currency translation is expected to result in a negative impact of just under 1% on a full year sales basis.

Speaker Change: Now I would like to share further commentary on our full year outlook and provide you with our second quarter guidance.

We expect wide transaction to add just over 1% MNA contribution to our full year 2024 revenue for inorganic sales incurred in the first four and a half months of the year.

Speaker Change: We expect to see an improvement in sales growth over the course of 'twenty 'twenty four as prior year comparisons, particularly in China become easier and as improved funnel activity translates to artists.

Therefore, our total reported sales growth guidance is unchanged at approximately 0% to 2%.

Speaker Change: Our full year guidance is unchanged with 'twenty 'twenty four organic constant currency sales growth expected between negative, 0.5% and positive one 5%.

Despite guiding to flattish sales, we expect to deliver a gross margin of 59.8% for the full year, which is a 20 basis points of expansion versus 2023.

Speaker Change: At current exchange rates.

We also expect to deliver 20 to 30 basis points of operating margin expansion versus 2023, resulting in an adjusted operating margin of slightly over 31%.

Speaker Change: Currency translation is expected to result in a negative impact.

Speaker Change: Just under 1% on a full year sales basis, we expect <unk> transaction to add just over 1% M&A contribution to our full year 'twenty 'twenty four revenue for inorganic sales incurred in the first four and half months of the year.

We expect our full year net interest expense to be approximately 80 million.

Our full year tax rate is expected to be 16.3% and our average diluted 2024 share count is expected to be approximately 59.7 million.

Speaker Change: Therefore, our top group reported sales growth guidance is unchanged at approximately zero percent with 2%.

Speaker Change: Despite guiding to flattish sales, we expect to deliver a gross margin of 59, 8% for the full year, which is a 20 basis points of expansion was the strength in 'twenty three.

Rolling all this together on a non-gap basis, our full year 2024 earnings per fully diluted share guidance is also unchanged and projected in the range of $11.75 to $12.5.

Speaker Change: I also expect to deliver 20 to 30 basis points of operating margin expansion versus 2023, resulting in an adjusted operating margin of slightly over 31%.

This is approximately 0 to 3% growth and includes an estimated headwind of approximately 2% due to unfavorable foreign exchange.

Speaker Change: We expect our full year net interest expense to be approximately $80 million.

Looking to the second quarter of 2024, we anticipate that cautious customer spending will persist.

Speaker Change: Our full year tax rate is expected to be 16, 3%.

Speaker Change: Average diluted 'twenty 'twenty four share count is expected to be approximately $59 7 million.

In addition, while the China Q2 baseline reflects the onset of weakness, it does not fully reflect the weakness we observed in the second half of the year.

Speaker Change: Rolling all this together on a non-GAAP basis.

As a result, we expect China to decline mid-teens in Q2 versus 28% decline we saw in Q1.

Speaker Change: Our full year 'twenty 'twenty earnings per fully diluted share guidance is also unchanged and projected in the range of $11 75.

Given these dynamics, we expect to see an improvement in year-over-year growth versus the first quarter, and our second quarter organic constant currency sales growth guidance is projected in the range of negative 6% to negative 4%.

Speaker Change: $12.05.

Speaker Change: This is approximately zero to 3% growth and includes an estimated headwind of approximately 2% due to unfavorable foreign exchange.

At current rates, currency translation is expected to subtract approximately 2%.

Speaker Change: Looking to the second quarter of 2024.

Speaker Change: Anticipate that cautious customer spending will persist.

YAT is expected to add approximately 1.5% MNA contribution for sales incurred in the first one and a half month of the quarter. Therefore, our total second quarter reported sales growth guidance is negative 6.5% to negative 4.5%.

Speaker Change: While the China Q2 base loans reflects the onset of weakness.

Speaker Change: Not fully reflect the weakness we absorbed in the second half of the year as a result, we expect China to decline mid teens in Q2 was 28% decline we saw in Q1.

Based on these revenue expectations, second quarter non-gap earnings for fully diluted share are estimated to be in the range of $2.50 to $2.60, which includes a negative currency impact of approximately 4 percentage points at current effects rates.

Speaker Change: Given these dynamics, we expect to see an improvement in year over year growth what is the first quarter and our second quarter organic constant currency sales growth guidance is projected in the range of negative 6% to negative 4%.

Speaker Change: At current rates currency translation is expected to subside approximately 2%.

Now I would like to turn the call back to UDED for some summary comments.

Speaker Change: <unk> is expected to add approximately one 5% M&A contribution.

Thank you, Amal. I would like now to give you a brief update on our progress towards leaving the world better than we found it, which is how we think about ESG.

Speaker Change: Sales incurred in the first one and a half month of the quarter.

Speaker Change: Therefore, our total second quarter reported sales growth guidance is negative six 5% to negative four 5%.

We work alongside wonderful people here at Waters, and I'm always proud when others recognize their talent and hard work. Our colleagues were recognized in the quarter for their achievements and contributions to separation science,

Speaker Change: Based on these revenue expectations second quarter non-GAAP earnings per fully diluted share are estimated to be in the range of $2 52.

excellence in manufacturing and for being champions of LGBTQ and women's benefits in the workplace.

Speaker Change: To $2 60.

Speaker Change: Which includes a negative currency impact of approximately four percentage points at current FX rates.

I would also like to congratulate Dr. Philip Wyatt, the founder of Wyatt Technology, for receiving the esteemed Pitcon Heritage Award earlier this year.

Speaker Change: Now I would like to turn the call back to wood.

Wood: For some summary comments.

Wood: Thank you I'm all I would like now to give you a brief update on our progress towards leaving the world better than we found it which is how we think about ESG.

Dr. Wyatt's groundbreaking contributions to laser light scattering technology have paved the way for industry-leading advancements.

From a corporate standpoint, Waters has once again been honored by Barron's, earning a place on its list of the 100 most sustainable companies in 2024.

Wood: We work alongside wonderful people here at waters, and I'm always proud when others recognize their talent and hard work our colleagues who are recognized in the quarter for their achievements and contributions to separation science excellence in manufacturing and for being champions of LGBTQ and women's benefits in the workplace.

Additionally, we are delighted to announce that S&P Global has included Waters in its 2024 Sustainability Yearbook.

Separately, our commitment

Through robust governance practices was recently highlighted by the New England chapter of the National Association of Corporate Directors. We were honored to have Massachusetts Governor Morah Healy present Waters with the 2024 Public Public Company Board of the Year Award.

Wood: I would also like to congratulate Dr. Phillip Wired the fond of biotechnology for receiving these teams been gone Heritage Award earlier this year.

Wood: Why it's groundbreaking contributions to laser light scattering technology have paved the way for industry leading advancements.

After recently committing to SBTI, which is the Science-based Target Initiative,

Wood: From a corporate standpoint waters has once again been honored by barron's, earning a place on its list of the 100, most sustainable companies in 2024.

We are now building on the excellent progress we've made in reducing our greenhouse gas emissions. We're in the process of setting new standards towards a long-term reduction in emissions and aligning our business with the 1.5 degree centigrade future.

Wood: Additionally, we are delighted to announce that S&P global has included waters and it's 2020 for sustainability yearbook.

Wood: Separately our commitment.

Now, to summarize, we're pleased with how the first quarter landed versus our expectations, which supports our full year guidance. We remain on track to achieving the 2024 objectives and look forward to building on this strength as the year progresses.

Wood: The robust governance practices was recently highlighted by the new England chapter of the National Association of corporate Directors, we were honored to have Massachusetts Governor Moura Healy present waters when in 2020 for public Company Board of the year Award.

Our long-term growth profile remains excellent and we are aligned to secular tailwinds that are stronger than ever in our attractive markets.

Wood: After recently committing to <unk>, which is the science based targets initiative.

With our robust financial profile and balanced capital allocation strategy, we have an excellent platform to deliver sustained value for our shareholders. So with that, I'll turn the call back over to Casper.

Wood: We are now building on the excellent progress we've made made in reducing our greenhouse gas emissions. We are in the process of setting new standards towards a long term reduction in emissions and aligning our business with the one five degree centigrade future.

Thanks, Susan. That concludes our formal comments. We are now ready to open the phone lines for questions.

Wood: Now to summarize we're pleased with how the first quarter landed versus our expectations, which supports our full year guidance, we remain on track to achieving the 'twenty 'twenty four objectives.

Thank you. We will now begin the question and answer portion of today's conference. At this time, if you would like to ask a question, please press star 1 to be entered in the queue.

We ask that you limit your questions to one question and one follow-up question to allow ample time for questions from each analyst that may wish to participate in this portion of the call. Again, that is star 1 to ask a question and star 2 to withdraw your question.

Wood: Forward to building on this strength as the year progresses.

Wood: Our long term growth profile remains excellent and we are aligned to secular tailwind that are stronger than ever and our attractive markets with a robust financial profile and balanced capital allocation strategy. We have an excellent platform to deliver sustained value for our shareholders. So with that I'll turn the call back over to Kasper.

Our first question comes from Dan Brennan from TD Cowan. Please go ahead.

Great, thank you. Thanks for the questions. Maybe the first one just on China. You know, you guys were coming into the quarter expecting down 40.

Kasper: Thank you that concludes our formal comments, we're now ready to open the phone lines for questions.

And it was, you know, certainly better than that. And you're talking about, you know, Q2 color. I'm just wondering, I know you guys gave some color what was going on in the quarter, but could you just unpack it a little bit more like what deviated from the guide, how is pacing in the quarter? And then is there any change to your full year down mid-teens, high-teens growth for China?

Kasper: Thank you we will now begin the question and answer a question of todays conference at this time, if you would like to ask a question. Please press star one to be entered in the queue. We ask that you limit your questions to one question and one follow up question to allow ample time for questions from each analyst may wish to participate in this portion of the call again that is star one to ask a question and start to two.

Thank you.

Kasper: Your question. Our first question comes from Dan Brennan from TD Cowen. Please go ahead.

Daniel Gregory Brennan: Great. Thank you thanks for the questions.

We expect that to continue for at least the first half of the year. Q2 will also see a decline and the second half of the year will start to see a little bit of growth given the weakening comps as the year progresses. Now coming back to Q1 to your question on what changed, I mean you just have to go back

Daniel Gregory Brennan: Maybe the first one just on China.

Daniel Gregory Brennan: Coming into the quarter expecting down 40.

Daniel Gregory Brennan: And it was.

Daniel Gregory Brennan: Certainly better than than you are talking about Q2 color I'm. Just wondering I know you guys gave some color on what was going on in the quarter, but could you just unpack it a little bit more like what deviated from the guide how is pacing in the quarter and then is there any change to your full year down mid teens high teens growth for China.

to late 2023 when we basically said, look, we think across all in markets, especially pharma, we've seen a bottoming out of the volume.

Daniel Gregory Brennan: Stan and good morning.

And from that baseline, we started to see better activity, especially on the replacement of LC's in our branded genetic segment and something that we talked about in the last quarter as well.

Stan: China came in better than we expected, but I'll remind you it's still declining in the high in the high Twenty's now we expect.

We expect that to continue.

Now, it's early days, we're starting to see a turn

Stan: For at least the first half of the year Q2, we'll also see a decline.

Stan: In the second half of the year, we'll start to see a little bit of growth given the weakening comps as the year progresses now coming back to Q1 to your question on what what changed I mean, you just have to go back.

As customers start to replace this sort of highly aging LC fleet, so remember we again talked about it at the end of last year, when you look at the five-year stack growth of LC instruments for China in particular, it's down now almost double digits, about 8 to 9% versus the five years.

Stan: Late 2023, when we basically said look we think across all end markets, especially pharma, we've seen a bottoming out of off of the volume and from that baseline we started to see better activity, especially on especially on the replacement of Lcs and a banded genetic segment in <unk>.

So with that as a baseline, we expect to see the replacement cycle initiate, and we started to see that already in Q1.

Stan: The thing that we had talked about in the last quarter as well now it's in the it's.

To put things in perspective, there's also a fair amount of talk on the new stimulus, and the stimulus itself

It's early days, we are starting to see starting to see a turn.

Stan: As customers start to replace this sort of highly aging.

is very different than the previous one. It appears it's gonna roll over a three-year period, it's three times in size, and it explicitly calls out instrument replacement, so which encourages us,

Stan: As the fleets of remember, we again talked about it at the end of last year. When you look at the five year stack growth of LC instruments for China in particular, it's down now almost almost double digits about 8% to 9% versus a five year versus the five year versus five years.

But we have not incorporated that into the guide for the full year, which now we're basically saying is likely to be low double-digit decline as opposed to the high teams decline that we had talked about when we gave the full-year guidance. So China will...

Stan: With that as a baseline we expect to see the replacement cycle initiate and we started to see that already in Q1 now to put things in perspective.

will likely be a little bit better than we had anticipated. And just coming back to the stimulus and looking ahead,

Stan: There's also a fair amount of talk on the stimulus and the stimulus itself is very different than the previous one.

I would not, while we have not incorporated that into our guidance explicitly, I would not underestimate the importance of that on the psychology of CAPEX spending, especially the replacement cycle.

Stan: It appears it's going to it's going to roll over a three year period at three times in size.

As that sort of starts rolling out towards the latter half of the year and towards late 2024 and early 2025, we should see the sentiment improve and likely start of the replacement cycle in earnest.

Stan: And it specifically calls out instrument placements, which encourages us, but we have not incorporated that into the guide for the full year, which now we're basically saying is likely to be low double digit decline as opposed to the high teens decline that we had talked about when we gave full year guidance So China.

Next we'll go to Line of EJ Kumar from Evercore ISI. Please go ahead.

Stan: It will likely be a little bit better than we had anticipated.

Hey guys, thanks for taking my question. Maybe on that comment around China,

Stan: Just coming back to the stimulus and looking looking ahead.

Stan: I would not while we have not incorporated that into our guidance explicitly I would not underestimate the importance of that on the psychology of capex spending, especially the replacement cycle and as that sort of starts rolling out towards the latter half of the year and towards late 2024, and early 2025, we should see the center.

I think you mentioned improved funnel activity in the quarter as the quarter progress.

Is that funnel activity, is that being sort of driven by this China or is that global biopharm, any color and what you mean by the funnel activity? And I think for the back half, guidance, which assumes, I think, close to high singles growth.

Stan: And improve and likely stock of the replacement cycle in earnest.

What visibility do we have in growth normalizing and back half?

Stan: Next we'll go to the line of Vijay Kumar from Evercore ISI. Please go ahead.

Vijay Muniyappa Kumar: Hey, guys. Thanks for taking my question.

Yeah, Vijay, thank you for the two questions. So let me just sort of take a step back and provide some context, right? I mean, as you know, Q1,

Vijay Muniyappa Kumar: Maybe on that.

Vijay Muniyappa Kumar: Commentary around China.

Vijay Muniyappa Kumar: I think you mentioned <unk>.

Vijay Muniyappa Kumar: Improved funnel activity in the quarter as the quarter progressed is that funnel activity is that being sort of driven by this China or is that global biopharma any any color on what you mean by the funnel activity nothing to the back half guidance, which assumes.

is the toughest quarter for waters to predict. It's the smallest quarter of the year, and this is when customers start to think through the total capex spend for the year and also think through the phasing of that capex.

So we took advantage of that and I personally met several customers across Europe and in the United States across pharma, across A&G, across our industrial segments, across our clinical segments with our teams. And really there are three

Vijay Muniyappa Kumar: I think close to high singles food.

Vijay Muniyappa Kumar: Visibility do we have.

Vijay Muniyappa Kumar: Yes.

Vijay Muniyappa Kumar: In.

Vijay Muniyappa Kumar: Growth normalizing in the back half.

Speaker Change: Okay. Thank you for the two questions. So let me just sort of take a.

main takeaways. First, the quality of the funnel, the quality of the orders is way higher than what we saw a year ago across all of the segments, especially in in pharma, both in pharma and in biotech across Europe and the US.

Speaker Change: Step back and provide some context, David I mean as you know.

Speaker Change: Q1.

Speaker Change: Is the toughest quarter for waters to predict it's our smallest quarter of the year and this is when customers start to think through the total capex spend for the year and also think through the phasing of that Capex.

Second,

When you look at the traction of our new products, our new products are gaining a ton of traction and are being used heavily by our customers. And they're waiting to sort of adopt Alliance IS in earnest. You can go across the portfolio. It's being received extremely well.

Speaker Change: We took advantage of that and I personally met several customers across Europe, and the United States across pharma across A&D.

Speaker Change: Across our industrial segments out across our clinical segments with our teams and really there are three.

And third, the question on phasing,

While the orders are firm and strong, the capex spending is firm, given that it is decided in the late

Speaker Change: Main takeaways first the quality of the funnel the quality of the orders is way higher than what we saw a year ago across all of the segments, especially in pharma, both in pharma and biotech across Europe and the U S.

in the latter part of Q1,

we think it's safe to assume that you'll only start to see the benefit late in Q2 and more so in the second half of the year. So the funnel is weighted towards later in Q2 and the second half of the year. So that's what sort of has gone into our overall thinking. Now there are two big takeaways.

Speaker Change: Second when.

Speaker Change: When you when you look at the traction of our new products, our new products are gaining a ton of.

Speaker Change: <unk> done a fraction that are being used heavily by by us by our customers and they are waiting to sort of adopt alliance ISC and Ernest you can go across the portfolio, it's being received extremely well and third question on phasing.

we have increased confidence in our full year guide as a consequence of these discussions. And second, on the phasing, we simply went back and said, okay, let's just look at the last 15 years. Over the last 15 years, the Q2 usually is a step up from Q1 of about 11 to 12%.

Speaker Change: While the orders are a firm and strong the capex spending is firm given that it is decided in the late in that in the latter part of Q1.

And so we assumed a 10% step up from Q1 to Q2. And then first half versus second half, I mean, historically it's basically again over the last 15 years, almost like clockwork. First half is 45% and the second half is 55% of revenues. So that basically.

Speaker Change: We think it's safe to assume that you will only start to see the benefit late in Q2 and more and more so in the second half of the year. So the funnel is weighted towards later in Q2 and the second half of the year. So that's what sort of has gone into our overall thinking now there are two big takeaways one <unk>.

was the algorithm we used to look at the phasing of the guiding of the guide from a revenue perspective. But overall, really increased confidence in the fullier guide given the strengthening of the funnel and conversations across the globe and across customer segments, and second, the phasing is basically rooted in history.

Speaker Change: We have increased confidence in our full year guide as a consequence of these discussions and second on the phasing. We simply went back and said okay. Let's just look at the last 15 years over the last 15 years.

Speaker Change: Q2, usually the step up from Q1 of about 11%, 12% right and so we assumed a 10% step up from Q1 Q2, and then first half versus second half I mean, historically its basically again over the last 15 years almost like Clockwork first half is 45% in the second half is 55% of revenues so that basically.

Fantastic. Thanks, guys. I'll let us jump in.

Next, we'll go to the line of Michael Riskin from Bank of America. Please go ahead.

Thanks for taking the question, guys. Just following up on some of the end market commentary, you talked about China, a lot about how you expect a low double-digit decline.

Speaker Change: What the algorithm we used to look at the phasing of the phasing of the guidance from a revenue perspective, but overall really increased confidence in the full year guide given the strengthening of the funnel and conversations.

So what's better than prior. You're maintaining the fiscal year. So what's sort of offsetting that? And maybe specifically hone in on America's. It looked like that came a little bit worse in the quarter. Anything change in your outlook there for the year? And I've got a quick follow. Okay.

Speaker Change: Across the globe and across customer segments and second the phasing is basically to look at in history.

Yeah, no, Mike, at this point, we are just derisking the remainder of the guide, right? We have a tad better expectations of China based on how we are executing in that market and we're keeping our full year guide flat.

Speaker Change: Fantastic, Thanks, guys and I'll, let others jump in.

Speaker Change: Next we'll go to the line of Michael Riskin from Bank of America. Please go ahead.

Michael Riskin: Hey, Thanks for taking the question guys.

And then I think you asked about the US in particular, what are we seeing in the US? Look, I mean, as I said, I spent a fair amount of time with customers across

Michael Riskin: Following up on some of the end market commentary you talked about China.

Michael Riskin: But how do you expect.

Michael Riskin: Low double digit decline somewhat better than prior year, maintaining the fiscal years, so what's sort of offsetting that.

the globe and one of those was a large customer in the Midwest where I spent a whole day with about 12 to 13 folks from the customer across many different departments, across development, manufacturing, QAQC, and we talked deeply about

Michael Riskin: Maybe specifically hone in on Americas, It looks like that came a little worse in the quarter.

Michael Riskin: Anything changed in your outlook there for the year.

Speaker Change: Got a quick follow up.

Speaker Change: Yes, no I mean, Mike at this point, we are just derisking the remainder of the guide right.

what they envision for CAPEX, which I sort of earlier commented on, and the CAPEX is very robust.

Second, we talked about the use of our new products. Think about in-line testing with LCs, think about our columns, think about the upgrades for Empower, the software, really, really well received. And we talked about the phasing of the spend, which also, again, is still sort of late Q2 and back half-weighted. But to put it all in perspective, if you look at,

Speaker Change: But our expectations of China based on how we are executing in that market and we are keeping our full year guide flat.

Speaker Change: And then I think you asked about the U S. In particular, what are you seeing in the U S look I mean, as I said I spend a fair amount of time with customers across the globe and one of those was a large customer in the Midwest, where do I spent a whole day with about 12 to 13 folks from the customer across many different departments across development.

the US itself

The five years back, Michael, is still

pretty healthy. It's in the mid to high single digits. So there is really no drama outside of China. I mean, we've had two exceptional years

Speaker Change: <unk> manufacturing QA, QC, and we docked deeply about what they envision for Capex, which I sort of all we have commented on in the Capex is very robust.

in Ex-China sales and now you have a little bit of a little bit of a lull, but the activity looks extremely good, gives us confidence for what we are planning for the full year. So as I said, no drama, no new news, but just other than the fact that new products are gaining traction,

Speaker Change: We talked about the use of our new products think about inline testing with SCE is think about our columns I think about the upgrades for empower the software really really well received and we talked about the phasing of the spend which also again is still sort of late Q2 and back half weighted but to put it all in perspective, if you look at.

and customers have much more robust orders than they did a year ago.

Okay. Thanks. If I could have a quick follow-up on Wyatt, you have some commentary on how the quarter progressed, and if you could elaborate on that a little bit. And it'll think you tweak down the M&A contribution for the year. I think it was 1.3 prior. Now it's 1.1. Is that instrument mix in Wyatt? Is that phasing through the year? Just sort of how's that acquisition trending? Thanks.

Speaker Change: The U S itself, the five year stack, Michael is still pretty pretty healthy it's in the mid to high single digits.

Speaker Change: Really no drama outside of China, I mean, we've had two exceptional years in.

Speaker Change: Ex China sales and now you have a little bit of a little bit of a lull.

Speaker Change: But the activity looks extremely good gives us confidence of what we are planning for the full year. So as I said no drama no new news, but just other than the fact that new products are gaining traction.

Yeah, look, I mean, on Wyat, we are making fantastic progress, right? All the synergies that we laid out at the beginning of the acquisition

like cross-selling, like attaching our LC seamlessly to the instrument,

Speaker Change: And customers have much more robust orders than they did a year ago.

like attaching our columns with their shipments, have all progressed ahead of schedule, including sort of a beta version of

Speaker Change: Okay. Thanks, Brian if I could squeeze in a quick follow up.

Speaker Change: On why it you had some commentary on.

bringing light scattering on Empower.

Speaker Change: How the quarter progressed, and if you could elaborate on that a little bit and it looks like you tweaked down the M&A contribution for the year I think it was one three prior announced one one is that instrument mix and why it is that see some phasing through the year just sort of how is that acquisition trending. Thanks.

Now keep in mind, right, Q1 is a really small quarter and

for instruments especially and when things sort of slip a couple of weeks here and there, it causes that distortion and that's why we sort of tweak down wire to 1.1% versus 1.3% MNA contribution

Speaker Change: Now look I mean on why we are making fantastic progress right.

But the way that acquisition is going, we are super happy where we are in that journey and really look forward to bringing light scattering into QAQC.

Speaker Change: All of the synergies that we laid out at the beginning of the acquisition.

Speaker Change: Like cross selling like attaching LLC seamlessly to the instrument.

And Michael, to build on it, again, from customer conversations, I had an opportunity

Speaker Change: Like attaching our columns with their shipments are all progress ahead of schedule, including sort of beta origin of bringing light scattering on empower now keep in mind like Q1 is a really small quarter in 14.

to spend some time last week.

with one of our largest academic customers who has a hospital attached to it.

And basically we talked at length about characterization of lipid nanoparticles, which as you will know, are used for delivery of MRNA, both vaccines and therapeutics as we go forward, an area of intense interest across academia and industry.

Speaker Change: Four instruments, especially in when things sort of slipped a couple of weeks here and there it causes that distortion and Thats why we sort of tweak down wire to one 1% versus one 3% in M&A contribution, but way that acquisition is going we are super happy where we are in that journey and really look forward to bringing lights.

And these folks specialize in characterizing lipid nanoparticles, which can often be aggregated of different, and have different sizes and shapes. Lights, they basically use

Speaker Change: Drilling into QA, QC and Michael to bid on it again from cost customer conversations I had an opportunity to spend some time last week with one of our largest academic customers, who has a hospital attached to it.

SEC columns from waters

and light scattering equipment to characterize these aggregates. In addition, what I learned is

that they are piloting the use of field flow fractionation, which is another instrument that why it makes, as a precursor to

Speaker Change: And basically we've talked at length about characterization of lipid nanoparticles, which as you will know are used for delivery of mrna both vaccines and therapeutics as we go forward an area of intense interest across academia and industry and these folks specialize in characterizing lipid nanoparticles, which can often be.

to using SEC malls, right? And field pro fractionation, and the early experiments indicate a really positive outcome, if those experiments work well, could become a mainstay for any experiment that is done

to separate these aggregates. And the same idea then applies to AAVs, which are viral vectors used for cell and gene therapy or other particles.

Speaker Change: Aggregated a difference there and then have different sizes and shapes light they basically use.

that are used in biologic. So very excited about what we're seeing in waters, really a great cultural fit, well ahead of all synergy targets, and customer conversations even give me more confidence. So in the mid to long term, we expect it to continue to be accretive, to growth, and to margins.

Speaker Change: The SEC columns from waters and light scattering equipment to characterize these aggregates. In addition, what I learned is that they are they are piloting the use of field flow fractionation, which is another instrument that why it makes.

Speaker Change: Precursor.

Speaker Change: Using SEC malls, right and field pro fractionation if.

Thank you. Our next question comes from Matt Sykes from Goldman Sachs. Please go ahead.

Speaker Change: And the early experiments indicate a really positive outcome. If those experiments work well could become a mainstay for any experiment that is done through separating these aggregates and the same idea then applies to <unk>, which is which are vital vectors used for cell and gene therapy or other particles.

Good morning, thanks to take my questions. Maybe just for visiting the guide.

Just given the lower than expected guidance Q2, and you mentioned that you expect sort of final activity translate into some level of orders toward the end of Q2 into Q3, have you changed sort of your view on the phasing for a second half in terms of

Speaker Change: That I used in biologics so very excited about what we're seeing and what is really a great cultural fit well ahead of our synergy targets.

the growth you're going to achieve in Q3 versus Q4. Are you pushing more of that potential growth into Q4? Is that saving it all changed for your full-year guide?

Speaker Change: And customer conversations even give me more confidence.

Speaker Change: Mid to long term, we expect to continue to be accretive to growth and to margins.

So, Matt, thanks for a question. And look, I mean, we executed well to finish at higher end of our Q1 guide, right? And that sort of keeps us on track for our full year sales guide.

Speaker Change: Thank you. Our next question comes from Matt <unk> from Goldman Sachs. Please go ahead.

Matt: Hey, good morning, Thanks for taking my questions, maybe just revisiting the guide.

And as Udit discussed, our Q2 guide is essentially

Matt: Just given the lower than expected guide in Q2, and you mentioned that you expect sort of funnel activity translate into some level of orders towards the end of Q2 into Q3 have you changed sort of your view on the phasing for second half in terms of.

10% higher than Q1, which has been sort of our

historical trend pre-pandemic. And our second half guide is also very much consistent with how we've historically performed, which is a 45-55 split. So we generally expect the

Matt: The growth Youre going to achieve in Q3 versus Q4, you're pushing more of that potential growth.

the breakdown between Q3 and Q4 to also follow that historical trend for 2024. And I think Matt, thanks for the question. And again, I'll remind you, we had the same discussion when we looked at Q3 versus Q4 of 2023 and there was a lot of discussion on the ramp and

Matt: Into Q4 is that phasing at all changed for your full year guide.

Speaker Change: So Matt Thanks for your question and look I mean, we executed well to finish at the higher end of our Q1 guide right in that sort of keeps us on track for our full year sales guide.

Speaker Change: And that will be discussed on the Q2 guide is essentially 10% higher than Q1, which has been sort of an historical trend pre pandemic.

I think we again landed

at the higher end of what we were predicting. So difficult business overall

to predict if you have high average selling pipe price instruments. But I think we have so much statistics from the history of waters.

Speaker Change: Our second half guide is also very much consistent with how we've historically performed which is a 45 55 split so we generally expect.

It gives us a lot of confidence and couple that with discussions that we've had with customers that we think. The Fulia Guide is fully intact and quarter on quarter, there's a lot more time to talk about

Speaker Change: The breakdown between Q3 and Q4 to also follow that historical trend.

how Q2 evolves on the ramp between Q3 and Q4.

Speaker Change: For 2024.

but history should be a decent guide if you're really looking at that sort of modeling.

Speaker Change: Matt Thanks for the question and again I'll remind you we had the same discussion when we looked at Q3 versus Q4 of.

between quarters. Yeah, I mean on a growth basis, it looks a little weird, but that's

Matt: 2023, and there was a lot of discussion on the ramp and I think we again landed at the higher end of what we were what we were predicting so difficult business overall to predict if you have high high <unk>.

because of last year, right? The weakness progressively stepped into China and pretty much Q3 and Q4, there was no incremental

meaningful bad news out of China, but a lot of that was not reflected in Q1 and Q2. And that's why it plays out in the growth purely from the baseline effect, mostly from China. I think what Amo is saying is that's arithmetic and customer conversations give us confidence that we have a pretty good

Matt: Average selling price instruments, but I think we have Soma statistics from the history of waters. It gives us a lot of confidence and couple that with the discussions that we've had with customers that we think the full year guide is fully intact and quarter on quarter. There is a lot more time to talk about it as we see how Q2 evolves on the ramp between Q3 and Q4, but history should be a decent guide.

Settle visibility.

Great. Thanks for that color. And then just one quick follow-up, just in the academic and market in the quarter, I know you were facing a really challenging comp. I think you grew

Matt: If you're really looking at that sort of modeling between quarters, but I mean on.

Matt: On a gross basis, it looks a little weird, but thats because of last year.

academic like 45% constant currency in Q1 of last year. So was there any incremental weakness in that academic end market or was it just purely facing difficult comps?

Matt: The weakness progressively stepped into China and pretty much Q3, and Q4, there was no incremental meaningful bad news out of China, but a lot of that was not reflected in Q1, and Q2 and thats why its sort of it plays out in the growth purely from peak slightly sick.

I think you nailed it. It's really difficult comps. I mean, it is our smallest segment in particular anyway. So you see an exaggerated drop if you just look at ear on ear. And again, if you

Matt: From China being one of them one of the thing is inserted kinetic and customer conversations give us confidence that we have a pretty good setup.

look at

sort of the long-term trend and which is sort of the best way to look at waters in any case even in A&G What you find is the five-year comp is at the low single digit five-year Kegar is at a low single-digit range and X China as I keep saying there's really no drama X China You're at almost two to three percent growth versus

Matt: Is it weighted.

Speaker Change: Great. Thanks for that color and then just one quick follow up just in the academic end market in the quarter. I know you were facing a really challenging comp I think you grew academic like 45% constant currency.

Matt: Q1 of last year, so was there any incremental weakness in that academic end market or was it just purely facing difficult comps.

versus what we saw five years ago on a Kegar basis, and China is down about sort of mid, low to mid single digits in the academic segment again, given the comps from last year, but also a little bit more exaggerated weakness.

Speaker Change: I think you nailed it it's really difficult comps I mean it is.

Speaker Change: It is our smallest segment in particular anyway.

Speaker Change: So youll see an exaggerated drop if you just look at year on year and again, if you look at.

Thank you. Next we'll go to Rachel Voughtonstahl from J.P. Morgan. Please go ahead.

Speaker Change: The long term trend and which is sort of the best way to look at waters in any case, even an A&D what you'll find is the five year comp is at the low single digit five year CAGR is at a low single digit range and ex China as I keep saying Theres really no drama ex China U.

Hi, good morning. Thanks so much for taking the question. So I wanted to dig into the pharma performance in China a little bit. I believe you said that was down 30% this quarter versus rest of world down low single digits. So can you unpack that China performance within pharma for us a little bit? Obviously we've seen the headlines related to biosecure Act last year at 1Q2 you guys called out your overexposure to CDMOs in the region. So can you quantify for us how much of this was driven by those tier 1 CDMOs in the region this quarter? And then you previously have kind of broken out those trends between tier one versus tier two and three CDMOs. So could you do that for this quarter as well? Thank you.

Speaker Change: Almost towards the 3% growth versus.

Speaker Change: Versus what we saw five years ago on a CAGR basis in China is down about sort of mid to low low to mid single digits in the academic segment again.

Speaker Change: Given the comps from last year, but also a little bit.

Speaker Change: Good morning, exaggerating weakness.

Speaker Change: Thank you next we'll go to Rachel Rawtenstall from Jpmorgan. Please go ahead.

So, look, I mean, great question. As you sort of traveled through last year, Q2, Q3, Q4, we saw weakness creep in on different elements of the pharma business in China.

Rachel Marie Vatnsdal Olson: Hi, good morning. Thanks, so much for taking my question. So I wanted to dig into the pharma performance in China, a little bit and maybe you said that was down 30% this quarter versus rest of world down low single digits. So can you talk about China performance within farm outs or asked a little bit obviously, we've seen the headlines related to bias to Cure Act last year at <unk> you guys called.

But I said earlier in Q3 and Q4, there was no

incremental bad news out of China and that trend sort of has continued into Q1.

And so in a way, what played out, what you see in terms of the decline is largely baseline related, where China, from a former point of view, has bottomed out.

Rachel Marie Vatnsdal Olson: Okay exposure to seeking and that was in the region. So can you quantify for us how much of thats been driven by the tier one cities in the region.

Rachel Marie Vatnsdal Olson: In this quarter and then your previous previously broken out those Chinese between tier one versus tier two and three.

and there is no incremental headwind coming into the business. But we are also not seeing sort of growth in activity, both in CDMOs or in

Rachel Marie Vatnsdal Olson: Could you do that for this quarter as well.

Speaker Change: So look I mean.

Speaker Change: Great question.

Speaker Change: <unk>.

Speaker Change: As you sort of travel through last year Q2, Q3, Q4, we saw weakness creeping on different elements of the pharma business in China.

branded generics or in biotechs in China. So if anything, let's call it stable.

Now, on your second point, which is around the Biosecure Act, I mean, look, with the weakness that we observed in 2023, the baseline is largely corrected in China for sub-markets like CDMOs, including Wushi.

Speaker Change: But as I said earlier in Q3 and Q4, there was no incremental bad news out of China and that sort of has continued into Q1.

Speaker Change: And so in a way.

Speaker Change: What played out what you've seen in terms of the decline is largely baseline related with China from a funnel point of view has bottomed out.

What we are seeing in the market is customers are taking proactive measures to secure their supply chain.

Rachel Marie Vatnsdal Olson: And there is no incremental headwind coming into their business.

And when they are doing that,

Rachel Marie Vatnsdal Olson: But we're also not seeing sort of a.

Our service organization, which is really well respected in the industry and plays a pivotal role in these text transfers, are deeply embedded when these moves happen, right? I mean, our role is to support customers in

Rachel Marie Vatnsdal Olson: Growth in activity both in <unk> order in.

Rachel Marie Vatnsdal Olson: Branded generics are in biotechs in China, So if anything let's call. It stable now on your second point, which is around the <unk>.

Rachel Marie Vatnsdal Olson: I mean look.

their pursuits and our customers really value our support when they go through situations like this and move products from one side to another.

Rachel Marie Vatnsdal Olson: The weakness that we absorbed in 'twenty to 'twenty three the baseline is largely connected in China for <unk>.

Rachel Marie Vatnsdal Olson: Submarkets like CDM OS including Wuxi.

Yeah, and Rachel, just to embellish on this, and that's a very good sort of insightful

Rachel Marie Vatnsdal Olson: We are what we are seeing in the market. These customers are taking proactive measures to secure their supply chain.

question.

just to embellish what Amol said, on the minus 30% for Q1, it came minus 28%. Q1, it came above our expectations, largely because we started to see customers who have aging, LC, fleets,

Rachel Marie Vatnsdal Olson: And when they are doing that.

Rachel Marie Vatnsdal Olson: Our service organization, which is really with respected in the industry and plays a pivotal role in these fixed transfers are deeply embedded when these moves happened right.

in brandy generic start to move.

So we started to see that signal, which is a positive sign. And as I commented earlier, as the stimulus starts to roll in towards the latter part of the year, that should have

Rachel Marie Vatnsdal Olson: All role is to support customers in.

Rachel Marie Vatnsdal Olson: Their pursuits, and our customers really value our support when they go through situations like this and move products from one site one of them.

a positive impact on the psychology for spending capex. And I'll remind you that we're sort of almost

almost 50%.

the link went on these replacements

Rachel Marie Vatnsdal Olson: And in the range of just to embellish on on this and that's a very good insightful question.

in bandage generics, in the bandit generic segment, which is the largest segment for LCs in China. So we expect that to turn at some point, and the psychology will have a lot to do with it. And on biosecure,

Rachel Marie Vatnsdal Olson: Just to embellish on what <unk> said on the minus 30% for Q1. It came a minus 28% Q1. It came above our expectations largely because we started to see customers, who have aging fleets and vanda genetic stock to move. So we started to see that signal, which is a positive sign and as I commented earlier.

I mean, it's a net neutral for us at the end, right? I mean, we've already bottomed out on CDMOs in China, and I think as customers look for help in transferring from one vendor to another, we stand ready to help them.

Rachel Marie Vatnsdal Olson: Hi.

Rachel Marie Vatnsdal Olson: As the stimulus starts to roll in towards the latter part of the year that should have a positive impact on the psychology for spending Capex and I'll remind you that we are sort of almost almost 50% delinquent on these replacements.

Great. And then my follow-up, I wanted to push on that China stimulus dynamic a little bit more. We've heard from some of your peers that are working on proposals for customers at this point. So can you talk about the conversations you're having on your end with customers and if you're working on proposals as well? And specifically, what types of instruments and then which industries do you really expect to benefit from within China stimulus? You know, we've heard some rumors around this being a little bit more industrial focused. So are you seeing that in your, you know, proposal funnel as well? And then when do you think that this could eventually translate into orders and revenue? As you mentioned back half the years, some of the psychological impacts. So any color on timing expectations would be helpful as well. Thank you. Everything and anything about the stimulus, Rachel, look, the timing I don't

Rachel Marie Vatnsdal Olson: <unk> genetics in the banded genetic segment, which is the largest segment for LTE in China. So we expect that to turn at some point and the psychology would have a lot to do with it and on bio secure.

Rachel Marie Vatnsdal Olson: It's a net neutral for us at the end right.

Rachel Marie Vatnsdal Olson: <unk> bottomed out on <unk> in China.

Rachel Marie Vatnsdal Olson: And I think as customers look for has been transferring from one one vendor to another we stand ready to help them.

Speaker Change: Great and then my follow up I wanted to push on that Chinas Daniela. Thank you, Mike a little bit more.

don't have much more to add than what I said earlier, I think the latter half of the year. We are indeed working with several customers on their plans for the stimulus as they hear more across the country.

Daniela: So some of your peers that are working on proposals for customers. At this point. So can you talk about the conversations you are having on your rins of customers Youre working on proposals as well.

Mike: Typically what types of instruments, and then which industries do you really expect benefit from within China.

And it is a broad stimulus. I mean, this time around, it's a three-year stimulus. It's three times in size.

Daniela: Printing rumors around this being a little bit more industrial focused or are you seeing now in Europe.

quite broad across virtually every customer segment.

Daniela: Proposal funnel as well and then when do you think that this could eventually translate into orders and revenue you mentioned back half psychological impact so any color on timing expectations that'd be helpful. Thank you.

not just limited to A&G. And frankly speaking, I don't know what people, if they got extra money in academic academia, what they would do with it, because they've sort of been jockful, and I remember I commented sort of in Q3 last year about how many instruments they bought, high-res instruments, and

Speaker Change: Everything and anything about the stimulus Rachel.

Speaker Change: The timing I don't have much more to add than what I said earlier I think latter half of the year. We are indeed working with several customers on.

and how many are still in boxes. So I don't expect much of it to go to high tier A&G customers, but definitely beyond that, there is a lot of conversation across many different customer segments as they plan and they learn more about the details of the stimulus.

Speaker Change: The plans for the stimulus as they hear more.

Speaker Change: The country.

Daniela: And it is aimed at stimulus this time around it's a three year stint with us.

But I would not, and so we've not incorporated that into the diet, and I would not expect that impact sooner than sort of late

Daniela: Three times in size.

Daniela: Quite broad across virtually every customer segment.

Daniela: Not just limited to AMG and frankly speaking I don't know what.

later this year and in earnest first part of

Daniela: If they've got extra money in academic academia on what they will do with it because they've sort of been chockfull and I remember I commented.

first part of next year. So good conversations with customers, planning going on like you've heard from others, but a broader one, not just limited to academia, across industrial, across pharma, and the psychological impact I would not underestimate, as I said before, because

Daniela: In Q3 last year.

Daniela: About how many instruments that bought hybrids instruments and and how many are still in boxes. So I don't expect much of it to go to high tier AMG customers, but definitely beyond that.

I think we're operating at a significant deficit on LC instruments in bandage generics.

Daniela: There is a lot of conversation across many different customer segments as they plan and they learn more about the need to as of the stimulus.

Next, we'll go to the line of Dan Leonard from UBS. Please go ahead.

Daniela: But I would not expand so we have not incorporated that into the date and I would not expect that impact sooner than sort of late later this year and in earnest.

Thank you. One question on your gross margin expansion in the quarter. How much did better than expected product mix contribute to that? You mentioned that liquid chromatography did a bit better than plan and mass spec was a bit worse. So I'm curious how much of the contribution that was. Thank you.

Daniela: First part of first part of next year so.

Daniela: Good conversations with customers planning going on like you've heard from others, but a broader one not just limited to academia across industrial across pharma and the psychological impact I would not underestimate as I said before because I think we're operating at a significant deficit.

Dan, yeah, I mean, look, the product mix is helping at this point, especially given

lower instrument mix that's contributing about 30 basis points but keep in mind there was also a good 70 to 80 basis points of FX headwind that we offset it right so so the remaining delta is

Daniela: On LC instruments in Vanda genetics.

Daniela: Next we'll go to the line of Dan Leonard from UBS. Please go ahead.

favorably coming from price and some of the productivity initiatives in manufacturing.

Daniela: Sure.

Daniel Gregory Brennan: Alright. Thank you one question on your gross margin expansion in the quarter.

Daniel Gregory Brennan: How much did better than expected product mix contribute to that you mentioned that liquid chromatography did a bit better than plan in mass spec was a bit worse I'm curious how much how.

Thanks, Simon.

Next, we'll go to the line of Patrick Donnelly from City. Please go ahead.

Daniel Gregory Brennan: How much of the contribution that was thank you.

Hey guys, thanks for taking the questions. Who did? I guess in terms of some of these conversations you have, I'm just wondering, you know, what stage do you think we're in? You know, it sounds like

Daniela: Don Yes, I mean look.

Don: Mix is helping at this point, especially given.

Don: Lower instrument mix, that's contributing about 30 basis points.

Again, the conversations are funneled to your point, maybe improving a little bit, specifically with China, it sounds like maybe you're expecting the actual REBS to show up late this year at the earliest. How do you think about just the progression of these conversations into orders, into REBs?

Don: But keep in mind. There was also a good 70 to 80 basis points of FX headwind, but we offset that right. So the remaining there.

Don: Preferably coming from price.

And again, is there potential for a bit of an air pocket as these conversations pick up and the dollars materialize a little later in the year? How do you think about just the progression there?

Don: And some of the productivity initiatives in manufacturing.

Speaker Change: Thanks, Amit.

Don: Next we'll go to the line of Patrick Donnelly from Citi. Please go ahead.

It's a great question. Patrick, let's just take a full step back on waters, right? As you know, and many on the call know,

Patrick Donnelly: Hey, guys. Thanks for taking the questions.

Patrick Donnelly: I guess in terms of some of these conversations youre, having a I'm wondering what stage do you think we're in it sounds like again, the conversations with funnel to your point, maybe improving a little bit specifically with China. It sounds like maybe you're expecting the actual Reds and show up late this year at the earliest so how do you think about just the progression.

We've grown instruments roughly 5%. And I know your question is targeted towards instruments. Instruments have grown on average 5% over the last 15 years, right? And those statistics are sort of easily available given that we've not done a lot of MNA.

you can look at our longitudinal history on instruments, right? So about 5% on average, but no year is actually 5% on the dot. There are 5 that are well below, 5 that are well above, and 5 close to the average, right?

Patrick Donnelly: Of these conversations into orders into revenue and.

Don: Again is there a potential for a bit of an air pocket of these conversations pick up at $1 materialize later in the year. How do you think about just the progression there.

Start with that and since I've been at the company's last three and a half years, we've seen a microcosm of that already, right? So two years of 20 plus percent growth and now a bit of decline in instrument growth rate.

Speaker Change: It's a great question.

Speaker Change: Let's just take a full step back on the water side as you know and menu many on the call know.

Don: We've grown instruments roughly 5% on an earlier question is targeted towards instrument instruments have grown on average 5% over the last 15 years state and those statistics are sort of easily available given that we've not done a lot of M&A you can look at our longitudinal history on instruments site, so about 5% on average.

We didn't get too excited when things were at 20 plus percent growth for several quarters in a row. And we said this is not going to last, just given the long-term averages. And we're not so phased when we look at what we're seeing now.

And now let me sort of address your questions. With that as context, it's very difficult to predict a quarter on quarter rollout of instruments for waters. But I think it's more instructive to look at the five-year five-year average, especially when you think about LC.

Don: No year is actually 5% on the dock and eight five that are well below five that are well above five close to the average IAC stock.

Don: Start with that and since I've been at the company in the last three and half years, we've seen a microcosm of that already right. So two years of 20 plus percent growth and now a bit of.

A five-year Kager for LC is operating now at the low single-digit level. In China, it's almost double-digit decline. So we are due for a replacement cycle to begin

Don: The decline in.

Don: In instrument growth rate.

Don: He didn't get too excited when things were at 20 plus percent growth for several quarters in a row.

very soon in LC instrumentation. And remember, these are used in QAQC, so you can't forever defer these replacements. And the conversations that we've had with customers, and as I said, I spent a whole day with one of our largest customers, especially in QAQC,

Don: And we said this is this is not going to last just given the long term averages and we're not so phase when we look at what we are seeing now and now let me sort of address your question with that as context. It is very difficult to predict a quarter on quarter rollout of instruments for waters, but I think its more instructive to look at the five.

they are wearing to go and start the replacement cycles, right, on LCs. The aging fleet is not something that they want to have, especially for

Don: Our five year average, especially when you think about etsy.

new launches which are going to be high volume and of course marketed compound. So I think things are trending in the right direction. But again, I mean just put this all in context as really again one shouldn't get too excited when you see high growths and declines especially for our instrument portfolio.

Don: A five year CAGR for Etsy is operating now at the low single digit level in China, It's almost double digit decline. So we're due for a replacement cycle to begin that.

Don: <unk> and <unk>.

Don: As the instrumentation and remember these are used in <unk>, so you've gone forever.

And when you look at the full year, again I'll remind you that it's a 4555 average

Don: These replacements and the conversations that we've had with customers and as I said I spend a whole day with one of our largest customers, especially <unk> seen they are raring to go and start that replacement cycles right. On Etsy is the aging fleet is not something that they want to have especially for new launches, which I will.

for the overall business, right? First half 45%, second half 55%, and that's what we've assumed for the full year phasing overall, and the step up in the second quarter is roughly 10%. So just sort of give you

broad broad sort of signposts. But the conversations were with a heavy focus on QAQC, and we see the replacement signs of replacement cycles beginning both in China, which we commented on earlier, and X China.

Don: Going to be high volume and of course marketed compounds. So.

Don: I think things are trending in the right.

Don: Direction, but again I mean, just put this all in context is really again, one shouldn't get too excited when you see high grades declined, especially for our instrument portfolio.

Yeah, that makes a lot of sense. Thank you. And then, Amol, maybe just quickly on the margin side, can you just talk about the progression as we work our way through the year? I know you guys had some kind of cost initiatives working with the way through the year last year. So just try to think on the cadence there and any moving pieces you want to call out as we work our way through 24 here. Thank you, guys.

Don: And when you look at the full year.

Don: Again, I remind you that it's a 45 55 average.

Don: For the overall business first half, 45% second half, 55% and that's what we've assumed for the full year phasing overall.

Don: And the step up in the second quarter is.

Don: Roughly 10%, so just sort of give you.

Yeah, look, I mean, already in Q1, we put good numbers on board and continued our good financial performance.

Don: Broad.

Don: Sort of painful, but the conversations are with <unk>.

As you get into second half of the year, keep in mind the proactive cost actions that we took are already in the baseline, and there'll be some headwind as we accrue for bonuses. So you may not see

Don: With a heavy focus on <unk> and we see replacement signs of replacement cycles beginning both.

Don: China, which we commented on earlier and ex China.

Speaker Change: Yes that makes sense, thanks and.

meaningful margin expansion in the second half net of those two effects, but we would have mostly covered our ground for the 20 to 30 basis points of margin expansion.

Speaker Change: And then maybe just quickly on the on the margin side can you just talk about the progression as we work our way through the year. I know you guys had some kind of cost initiatives working their way through the year last year. So I'm just trying to think on the cadence there and any moving pieces you want to call out.

mostly in the first half. So we will still end up delivering an adjusted operating margin expansion of 20 to 30 basis points.

Speaker Change: Thank you guys.

Speaker Change: Yeah look I mean already in Q1, we put good numbers on board and continued our good financial performance.

Next, we'll go to the line of Doug Schenkel from Wolf Research. Please go ahead.

Speaker Change: As you get into second half of the year keep in mind the <unk>.

Hey, good morning and thank you for taking my question. Udutt, thank you for the commentary on the quality of the funnel and also providing context, looking back 15 years at seasonal patterns. That's helpful.

Speaker Change: The cost actions that we took on already in the baseline and there'll be some headwind.

Speaker Change: As we accrue for bonuses.

Speaker Change: So you may not see.

Speaker Change: Meaningful margin expansion in the second half net of those two effects.

That said, recognizing those points and even being mindful of the year-over-year comparisons and how they progress over the course of the year.

Speaker Change: But we would have mostly covered a lot of ground for the 20 to 30 basis points of margin expansion.

Your guidance, it doesn't seem conservative to me to be directed, at least as I look at the model. I'm struggling a little bit to kind of see how you get there in spite of all the helpful commentary you provided.

Speaker Change: Mostly in the first half so we will still end up delivering an adjusted operating margin expansion of 20 to 30 basis points.

Speaker Change: Next we'll go to the line of Doug Schenkel from Wolfe Research. Please go ahead.

To explain where I'm coming from, starting on revenue, the 45-55-H-1-H2 revenue split, it's a long-term norm, but it certainly isn't the recent norm. And then looking at things a different way,

Douglas Anthony Schenkel: Hey, good morning, and thank you for taking my question.

Speaker Change: Yeah.

Douglas Anthony Schenkel: Thank you for the commentary on the quality of the funnel and also providing context looking back 15 years that seasonal pattern. So that's helpful.

I think you would need to go down, you know, go from being down more than 6% organic in the first half to being up more than 7% positive in the second half. And for margins, if I'm doing the math right.

Douglas Anthony Schenkel: That said, recognizing those points and even being mindful of the year over year comparisons and how they progressed over the course of the year your guidance. It doesn't seem conservative to me to be directed at least as I look at the model.

I think you're essentially implying a targeted second half operating margin of around 33 and a half percent, which is a bigger first half to second half ramp than normal.

With all of that in mind, my questions are really the following. One, how dependent are you on an instrument recovery and in fact a normalization to trend in the fourth quarter to get to these targets?

Douglas Anthony Schenkel: Struggling a little bit to kind of see how you get there in spite of all the helpful commentary you provided.

Douglas Anthony Schenkel: To explain where I'm coming from starting on revenue and a $45 $55 <unk> to revenue split it's a long term norm, but it certainly isn't the recent norm and then looking at things a different way I think you would need to go down go from being down more than 6% organic in the first half to being up more than 7% positive in the second half and for margin.

Two, if the answer is you are assuming a normalization, how do we put that with the margin guidance?

And then third, given investor concern and just the market backdrop, you know, keeping in mind none of your peers sound good on China or instruments right now, did you contemplate cutting guidance a bit? I know that was a lot, so I'll get back in the queue and listen. Thank you.

Douglas Anthony Schenkel: If I'm doing the math right I think you're essentially implying a targeted second half operating margin of around 33, 5%, which is a bigger first half to second half ramp than normal so.

Go ahead, let it move start and then I'll jump in. Yeah, look, I mean,

Where we stand at this point, one may say, look, your Q2 guidance is conservative given there was some delay in budget releases in Q1.

Douglas Anthony Schenkel: With all of that in mind.

Douglas Anthony Schenkel: The questions are really the following one how dependent are you on an instrument recovery and in fact, a normalization to trend in the fourth quarter to get to these targets. Two if the answer is you are assuming a normalization how do we split that with the margin guidance and then third given investor concern and just the market backdrop, keeping in mind, none of your peers sound good.

and we've been prudent there

just to stay with our historical norm, right?

Q3, Q4, we have some visibility in CRM.

but the sales cycle, as you know, is six, nine months, so you don't have all the visibility. But it's still in line with the historical pattern, and we are seeing increased activity at early stages in our pipeline, which we think will convert into orders as the year progresses, right?

Douglas Anthony Schenkel: China or instruments right now.

Speaker Change: Would you contemplate cutting guidance a bit I know that was a lot. So I'll get back in the queue and lesson. Thank you.

Speaker Change: Go ahead, Ed side, and then ill jump in yeah look I mean.

If you look at X-China, pretty much across these quarters,

Ed: Where we stand at this 0.1 May see look your Q2 guidance is conservative view and there was some delay in budget releases in Q1.

It is on a five-year stack basis, little over mid-single digits. So again, as Uudit said, there is no noise ex-China.

Ed: And we've been prudent there just.

Ed: Just to stay with our historical norm right.

Ed: Q3, Q4, do we have some visibility even CRM.

Ed: But the sales cycle as you would normally six nine months. So you don't have all Luisa blippy.

Ed: But it's still in line with the historical pattern and we are seeing increased activity at early stages in our pipeline.

We did some of that in our guide where we saw a little bit better China and we did the remainder of the guide.

Ed: Which we think will convert into orders as the year progresses right. If you look at ex China pretty much across these quarters. It is on a five year stack basis little lower to mid single digits. So again as we did say there is no noise ex China and really what plays out in the growth guide is how.

On your second question on the margin,

I mean, as I said earlier, a lot of the cost work we did last year is in the second half baseline. So you're going to see very modest, if any, margin expansion in the second half, but we would have covered most of the ground on the 20 to 30 basis points of full year margin expansion in the first half.

Ed: Progressively the declining China translates to a modest increase in the second half of the year and Thats. What we are modeling there could be upside on China, China performed well.

And China, I mean, you know, stimulus is not in our guide.

We expect very little towards the end of the year, if any, because a lot of things need to be worked out there.

Ed: <unk>.

But we are super encouraged by what the government is doing both in terms of the size and the tenure of the stimulus and the secondary effect it will have on the local mentality and purchase patterns.

Ed: We did some of that in order to guide, where we saw a little bit better to China and we do this the remainder of the guide.

Ed: On your second question on the margin I mean, as I said earlier right.

Yeah, and then just to sort of, again, embellish just a little bit, Doug, and summarize

Ed: Lot of the cost work, we did last year is in the second half baseline so you're going to see very modest if any margin expansion in the second half, but we would have covered most of the ground on the 20 to 30 basis points of full year margin expansion in the first half.

First,

Yeah, I mean, the discussions with customers are increasingly positive, but we felt we want to see that land first before we start assuming

that it has come, right? So you can imagine given how difficult it is to predict instrument businesses year on year, quarter on quarter is a trickier exercise. So yes, the conversations are positive, but we want to see it land and then we'll have a hopefully you're right and then we can have another discussion at the end of Q2 that looks a little bit different. Second,

Ed: And in China.

Ed: The stimulus is not in our guide.

Ed: We expect very little towards the end of the year, if any because a lot of things need to be worked out there, but we are super encouraged by what the government is doing both in terms of the size and the tenure of the stimulus and the secondary effect. It will have on the local mentality and purchase patterns.

On China, it's a pure math issue, right?

Ed: And then just to sort of again embellish, just a little bit Doug and summarize first yeah, I mean, the discussions with customers are increasingly positive.

The year has started better than we expected, but the second half of the year is when all the weakness was plugged in into the overall numbers. So you see the second half being slightly, basically flattish to a slight growth. But you put it all together, I mean,

Ed: We wanted to see that land first before we start assuming that it is gone right. So you can imagine given how difficult. It is to predict instrument business. This quarter year on year quarter on quarter is that even a trickier is a tricky exercise. So yes. The conversations are positive, but we want to see Atlanta, and then would have a hopefully youre.

There is no drama X-China. It's low single-digit growth prediction for the full year.

across the different customer segments, especially pharma and academia. And in China, it's a low double-digit decline after a very significant decline in the previous year. So really, there's not a lot of risk, as I look at it, after the conversations that we've recently had with customers, the visibility we've

Speaker Change: Right and then we can have another discussion at the end of Q2 that looks a little bit different.

Speaker Change: Second on China, It's a pure math tissue right I mean.

we currently have.

Ed: It has started better than we expected, but the second half of the year is when all the weakness was was plugged in.

Thank you. And our final question comes from Catherine Schulte from Baird. Please go ahead.

Ed: Into into the overall numbers, so youll see second half being.

Ed: Basically flattish to a slight growth, but you put it altogether I mean.

Hey guys, thanks for the question. Maybe just on pharma, you know, I think you said down low single digits X China, and you talked about budgets opening up throughout the quarter. So can you just talk through the health of that end market outside of China exiting the quarter and your expectations for the second quarter for that end market?

Ed: <unk>.

Ed: There is no drama ex China, it's low single digit growth predictions for the for the year.

Ed: Across the different customer segments, especially pharma and academia and then China at a low double digit decline after a very significant decline in the previous year. So really there's not a lot of risk as I look at it.

So Catherine, thank you, thank you for the question. Look, pharma overall, even last year grew low single digits for us for the full year. And the full year guide again is low single digit growth.

Ed: After the conversations that we've recently had with customers the visibility we currently have.

Q1 was sort of a low single digit decliner, but the conversations with customers make us even more confident that the full-year guide is very much intact for a low single-digit growth in pharma.

Ed: Thank you and our final question comes from Catherine Schulte from Baird. Please go ahead.

Catherine Walden Ramsey Schulte: Hey, guys. Thanks for the question, maybe just on pharma and I think you said down low single digits ex China, and you talked about budgets opening up throughout the quarter. So can you just talk through the health of that market.

And as I said before, look, first the orders look much more firm than they did a year ago, across biotech and across pharma.

Second, when I look at what traction our products have, especially the products that are meant to solve problems for large molecules, be it in columns, and I talked about that in the prepared remarks, be it in analysis using light scattering or using mass spec and LC,

Catherine Walden Ramsey Schulte: China exiting the quarter and your expectations for the second quarter suburban market.

Speaker Change: Yes, so catherine.

Catherine Walden Ramsey Schulte: Thank you. Thank you for the question look pharma overall, even last year grew low single digits for us for the full year and the full year guide again is low single digit growth Q1 was.

the products have extremely, extremely good traction. And as far as phasing is concerned, it's the same commentary that I provided overall. Look, Q1 came in as we expected for pharma, and as we rolled through the year, basically the comps get a little bit easier, and so you see us landing the full year with a low single digit.

Catherine Walden Ramsey Schulte: Sort of a low single digit decliner, but the conversations with customers make us even more confidence that the full year guide is very much intact for a low single digit growth in pharma and as I said before look.

Catherine Walden Ramsey Schulte: First the orders.

Catherine Walden Ramsey Schulte: More firm than they did a year ago across biotech and across pharma.

Catherine Walden Ramsey Schulte: Second when I when I look at what traction our products have especially the products that are meant to solve problems for large molecules and columns and I talked about that in the prepared remarks be it in.

Thank you for joining us today and for your continued support and interest in Waters. A replay of this call will be available in the investor relations section of our website. This concludes our call and we look forward to seeing you at future events and conferences.

Catherine Walden Ramsey Schulte: In analysis, using nice catching or using mass spec in L. C.

Thank you all for joining. That concludes the Waters Corporation first quarter, 2004 Financial Results Conference Call. You may disconnect at this time and have a great rest of your day.

Catherine Walden Ramsey Schulte: Having extremely extremely good traction and then as far as phasing is concerned.

Catherine Walden Ramsey Schulte: It's the same commentary that I provided overall look of.

Catherine Walden Ramsey Schulte: Q1 came in as we expected for pharma and.

Catherine Walden Ramsey Schulte: And as we roll through the year basically the comps get a little bit easier and so you'll see us landing it before the planning the full year with a low single digit growth for pharma.

Speaker Change: Thank you for joining us today and for your continued support and interest in waters.

Speaker Change: <unk> of this call will be available in the Investor Relations section of our website.

Speaker Change: This concludes our call and we look forward to seeing you at future events and conferences.

Speaker Change: Thank you all for joining that concludes the waters Corporation first quarter 2024 financial results Conference call. You may disconnect at this time and have a great rest of your day.

Speaker Change: The waters Corporation first quarter 2024 financial results Conference call. You may disconnect at this time and have a great rest of your day.