Q4 2024 Waters Corp Earnings Call
Speaker Change: Good morning. Welcome to the Waters Cooperation Fourth Quarter 2024 Financial Results Conference Call.
Speaker Change: All participants will be in a listen-only mode until the question-and-answer session begins.
Speaker Change: This call is being recorded. If you have any objections, please disconnect at this time.
Speaker Change: <unk> are only our present expectations and actual events or results may differ materially. Please see the risk factors included within our Form 10-K form 10, Qs and the cautionary language included in this morning's earnings release.
Speaker Change: During today's call, we will refer to certain non-GAAP financial measures reconciliations to the most directly comparable GAAP measures are attached to our earnings release and in the appendix of the slide presentation accompanying today's call. Both are available on the Investor Relations section of our website.
Speaker Change: Let's face it otherwise references to quarterly results, increasing or decreasing are in comparison to the fourth quarter of fiscal year 2023.
Speaker Change: In addition, unless stated otherwise all year over year revenue growth rates and ranges given on today's call are on a comparable organic constant currency basis.
Speaker Change: Finally, we do not intend to update our guidance predictions or projections, except as part of our regularly scheduled earnings release or as otherwise required by law now I'd like to hand, the call over to <unk> to deliver our key remarks are more will then present a more detailed overview of our results and guidance and then after we will open the phone lines for questions.
Speaker Change: Over to you. Thank you Gaspar and good morning, everyone.
Speaker Change: We delivered an excellent finish to 2024 in the fourth quarter.
Speaker Change: Leaving high single digit constant currency revenue growth and low teens adjusted EPS growth in pharma, which is our largest end market sales grew low double digits.
Speaker Change: Before diving into the details I want to thank my colleagues at waters for their resilience innovative spirit and collaborations.
Speaker Change: This fuels, our strong sales performance and operational achievements as we accelerate the benefits of pioneering science.
Speaker Change: Throughout the year, our message has remained clear and consistent.
Speaker Change: Executing well in an analytical instruments and systems market that is beginning its recovery.
Speaker Change: Innovation in our revitalized portfolio is well aligned with customer unmet needs at a time when instruments are ripe for replacement.
Speaker Change: Our focus and leadership position in downstream high volume life Science applications has earned US a unique exposure to an exciting mix of fast growing high volume testing opportunities. This includes DLP, one testing <unk> testing and the genetics market in India.
Speaker Change: Today I am pleased to share the latest proof points that demonstrate our favorable position right at a time when a recovery in customer capex spending and instrument replacement is beginning to kick into gear.
Speaker Change: I expect the strength and momentum to continue into 2025, and we will cover. This later in the call.
Turning now to our results in the fourth quarter sales grew six 4% as reported and 8% in constant currency.
Speaker Change: Sales exceeded the high end of our guidance range as growth accelerated across all our three reported regions.
Speaker Change: The instruments grew 8% outpacing our expectations as LC mass spec light scattering NPA system sales each grew high single digits or better <unk>.
Speaker Change: Recurring revenues grew 9% also marking an improvement from the previous quarter with chemistry and service both up high single digits.
Speaker Change: We continued to build momentum delivering a high teens quarter over quarter revenue ramp up while funnel activity remains strong.
Speaker Change: We also achieved outstanding results within our P&L with a sustained focus on operational excellence, our non-GAAP earnings per share was $4.10, reflecting 13% EPS growth.
Speaker Change: Excluding the impact of FX, our adjusted EPS grew 22% on a GAAP basis EPS was $3 88%.
Speaker Change: Turning now to the full year sales were flat as reported and an organic constant currency as a quarterly growth performance improved every quarter regarding revenue grew 6% once again underscoring the unique resilience of our recurring portfolio across various market conditions.
Speaker Change: With a strong EPS result in Q4, our full year non-GAAP earnings per fully diluted share was $11 86.
Speaker Change: This reflects 1% growth and includes a 5% decline due to foreign exchange headwinds on a GAAP basis, EPS was $10 71 per share.
Speaker Change: Breaking out our results in more detail.
Speaker Change: We saw strong broad based growth in the fourth quarter strength was led by our pharma and academic end markets, both of which grew double digits in pharma sales grew 10% led by low double digit growth in Europe, and Asia and high single digit growth in the Americas in particular spending amongst large pharma contra.
Speaker Change: Manufacturing organizations and genetics customers continued to recover that our revenue is tied to high volume regulated QA QC applications.
Speaker Change: In our non pharma segment sales grew 6% led by low double digit growth in Europe mid single digit growth in Asia, and low single digit growth in the Americas, We saw strong growth in the AMG segment across Asia, including China, Japan, and India as well as in Europe.
Speaker Change: By geography, Europe grew 11% Asia, 9% America, 6% in China.
Speaker Change: Sales returned to positive growth in China.
Speaker Change: <unk> was up low single digits.
Speaker Change: Although altogether these results reflect excellent momentum.
Speaker Change: Into the year and I would now like to share more in depth more in depth commentary on what drove our strong performance.
Speaker Change: With our commercial focus and disciplined execution, we continued to deliver impressive outcomes driving like for like pricing gains. We also capitalized on the success of our new product launches achieved strong placement of our new flagship products that command the price premium due to the unmatched benefits and solving customers' unmet needs.
Speaker Change: Within LC Alliance ice has paved the way for smarter more capable liquid chromatography separation that minimises user errors in the fourth quarter sales more than doubled quarter over quarter.
Speaker Change: Alliance is constituted 20% 20% of our HPLC revenue in the fourth quarter. After adoption continued to scale throughout the year.
Speaker Change: Within mass spec does Evo TQ absolute system remained our best selling mass spectrometer with its market, leading sensitivity and sustainable design and the fourth quarter unit sales grew 40% year over year and constituted 50% of our tandem quad revenue as a reminder, tandem.
Speaker Change: Tandem quads are the most suitable mass specs for high volume quantitative measurements and compliant settings.
Speaker Change: <unk> absolute has been a key driver of the strong results, we've achieved in beef as testing and in clinical applications.
Speaker Change: First revenue grew over 40% in the fourth quarter and for the year.
Speaker Change: First testing is a $400 million global market growing at 20% annually. So this represents growth at approximately twice the market for the second consecutive year.
Speaker Change: For clinical total clinical revenue grew low teens in the quarter driven in part by strong sales of the IBD version of the <unk> absolute.
Speaker Change: Within our chemistry consumables business, our newer column launches aimed at separating larger more complex molecules like biologics and novel modalities continued to perform ahead of expectations.
Speaker Change: <unk> Premier columns sales grew over 30% in the quarter and over 40% for the year with success of our new column launches our exposure to higher growth large molecule applications has risen large molecule applications are now approximately 40% of our pharma chemistry revenue and growing.
Speaker Change: Our service and our service team has continued to make strides in increasing plan attachment for the first time over 50% of our active installed base has a service plan in place.
Speaker Change: <unk> recently recognized our service team for delivering the highest service satisfaction scores among all instrument vendors.
Speaker Change: At the same time, our net promoter scores lead the industry, According to technology and services industry associations.
Speaker Change: During the quarter.
Speaker Change: A unique exposure to new high volume testing drivers also contributor to our growth. This.
Speaker Change: This includes novel therapeutic areas, such as DLP, one testing DFAST testing applications in food and environmental testing and the expanding generic drug market genetic stock market in India.
Speaker Change: All three represent a compelling growth opportunity for waters based on our leadership position in downstream high volume life Science applications in 2024, before we performed very well against our growth expectations in each of these areas in the near to midterm. We continue to expect 30 basis points annual average growth accretion from both.
Speaker Change: <unk> testing and <unk> testing by while India is expected to add 70 to 100 basis points to the growth.
Speaker Change: Now I will talk more about our operational performance.
Speaker Change: Our team faced numerous margin challenges throughout the year, including FX inflation, and a normalization of annual incentive compensation.
Speaker Change: Despite a rapid strengthening of the U S dollar during the fourth quarter, our unwavering focus on operational excellence allowed us to counteract the currency headwinds, we achieved a 60 basis point increase in adjusted operating margin.
Speaker Change: <unk>, 35.5% after absorbing 220 basis points of FX impact.
Speaker Change: Offsetting currency and macroeconomic headwinds is something our team has gotten very good at for the full year, we achieved year over year adjusted operation operating margin expansion closing the year at 31%. This is after absorbing 130 basis points of FX related impact.
Speaker Change: As we look ahead.
Speaker Change: While no two macro macroeconomic environments at the same instrument down cycles have historically been followed by an up cycle as a new instrument replacement cycle emerges. During these upfront instrument growth has typically been 2% to 3% higher than the long term average of 5%.
Speaker Change: Currently our instrument growth sits at 2% on a five year CAGR basis versus 2019.
Speaker Change: This comes after weak macroeconomic conditions put temporary constraints on customer capex spending for downstream instrumentation in recent years.
Speaker Change: The growth catch up opportunity from this deferred instrument replacement is beginning to kick into gear.
Speaker Change: Meanwhile, in the longer term, we expect the average growth rate of instruments to actually trend higher than the historical 5% driven by higher volume trends, new application areas like large molecules and better pricing dynamics.
Speaker Change: Together with the progress we've made in our high growth Adjacencies waters is well positioned for an exciting new era of growth as the analytical instrument market continues to recover. This also coincides with the launch of a new wave of commercial and value creation initiatives that we look forward to discussing in detail at all.
Speaker Change: Upcoming Investor day.
Speaker Change: I will now cover the 2025 full year guidance.
Speaker Change: Customer spending has shown steady signs of recovery in analytical instruments, particularly in the downstream high volume settings that we serve.
Speaker Change: We expect these positive trends to continue into 2025.
Speaker Change: Our team continues to execute well with our revitalized portfolio at a time when instrument replacement is beginning to pick up.
Speaker Change: Together, our resilient recurring revenue growth and the ongoing impact of our idiosyncratic growth drivers, we anticipate continuing our strong momentum into 2025.
Speaker Change: These dynamics support full year 2025 constant currency sales growth guidance of 4.5% to 7%.
Speaker Change: Within the P&L the recent strengthening of the U S. Dollar introduced additional foreign exchange headwinds. Nevertheless, we plan to counterbalance these impact with robust operational performance sustaining our margin expansion margin expansion trends into 2025. This translates to full year 2025 earnings per fully diluted diluted share guidance.
Speaker Change: <unk> of $12 70 to $13 an.
A mall: On a non-GAAP basis. This is a 7% to 10. This was a 7% to 10% growth versus our 2024 versus 2024 and includes an estimated headwind of approximately 4% due to unfavorable foreign exchange now I will pass the call over to a mall to cover our financial results in more detail and provide further details on our guidance.
Speaker Change: Thank.
Speaker Change: Thank you, Doug and good morning, everyone.
Speaker Change: In the fourth quarter, we delivered a strong finish to the year sales of $873 million grew 6% as reported and 8% in constant currency as both instruments and recurring revenues grew high single digits.
Speaker Change: With a strong commercial execution and new product portfolio, we benefited from budget flushes overall sales ramped up $132 million or 18% quarter over quarter.
Speaker Change: This was meaningfully higher than the mid teens.
Speaker Change: Function in our guidance.
Speaker Change: In constant currency terms by end market pharma grew 10% industrial grew 2% and academic and government grew 16%.
Speaker Change: In pharma sales grew 12% in previous year.
Speaker Change: 7% in Europe, and 9% in Americas.
Instrument sales grew high single digits led by liquid chromatography is before customer spending continued its early stages of recovery.
Speaker Change: Industrial growth was led by our IPA Division, which also grew high single digits, Amit strengthen batteries.
Speaker Change: <unk> materials and chemical testing.
Speaker Change: Again, our waters Division, we continued to see strong growth in beef also diluted applications, which grew over 40% in the quarter.
Speaker Change: In academic and government and the strong performance was driven by 35% growth in Asia, and 20% growth in Europe.
Speaker Change: Within Asia growth was broad based.
Speaker Change: By geography, each of our three reported regions saw significant growth acceleration versus the prior quarter Europe grew 11% Asia grew 9% and Americas grew 6% each with broad strength across our end markets.
Speaker Change: In China, We also returned to growth up low single digits.
Speaker Change: By products and services instruments grew 8%, reflecting broad strength across our instrument portfolio, including LC mass spec light scattering NPA.
Speaker Change: In recurring revenue chemistry grew 7% and service grew 9% as customer activity remained strong with high utilization of our installed base.
Speaker Change: Our robust growth has been supported by our commercial initiatives in areas such as so respond attachment e-commerce adoption and launch of our new buyers of patient columns.
Speaker Change: Turning now to full year results sales of $2 96 billion were flat as reported and flat in organic constant currency terms.
Speaker Change: By end market Palomar grew 1% industrial was flat and academic and government declined 7%.
Speaker Change: By geography, Europe grew 2%, while Americas and Asia, both declined 1%.
Speaker Change: Asia ex China grew high single digits, while China declined low double digits as expected.
Speaker Change: By products and services instrument growth rate for the cohort throughout the year and declined 7% overall recurring revenues grew 6%, reflecting the resilience of our chemistry consumables and service businesses.
Speaker Change: Now I will comment on our fourth quarter and full year non-GAAP financial performance versus last year.
Speaker Change: During the fourth quarter of the U S dollar strengthened significantly with our focus on operational excellence, including pricing productivity and cost management.
Speaker Change: We're able to offset the impact.
Speaker Change: Gross margin was 61% for the quarter and 59, 4% for the full year excluding.
Speaker Change: Excluding FX gross margin expanded 60 basis points and AEP basis points, respectively.
Speaker Change: For the quarter adjusted operating margin expanded 60 basis points.
Speaker Change: 35, 5%.
Speaker Change: For the full year.
Speaker Change: <unk> operating margin expanded to 31% after absorbing 130 basis points of adverse FX impact as well as the normalization of annual incentive compensation.
Speaker Change: As we look ahead, we are well positioned to continue our margin expansion journey through our productivity initiatives and vehicle profitability to new Heights.
Speaker Change: Together with better than expected sales volume our strong operational performance drove 13% growth in non-GAAP earnings per fully diluted share to $4.10.
Speaker Change: This landed at the high end of our guidance range.
Even with an FX headwind that was <unk> greater than anticipated.
Speaker Change: On GAAP basis, EPS was $3 88.
Speaker Change: For the full year non-GAAP EPS grew 1% to $11.86. This.
Speaker Change: This includes a decline of approximately 5% due to foreign exchange headwinds.
Speaker Change: On a GAAP basis EPS was $10 71.
Speaker Change: Our effective adjusted operating tax rate was 16, 9% for the quarter and 16, 4% for the full year.
Speaker Change: Our average share count was $59 6 million for the quarter and for the full year.
Speaker Change: Turning now to free cash flow capital deployment and our balance sheet.
Speaker Change: We define free cash flow as cash from operations less.
Speaker Change: Capital expenditures and excludes special items.
Speaker Change: In the fourth quarter of 'twenty 'twenty four free cash flow was $188 million after funding 52 million of capital expenditures, including the purchase of 30 million manufacturing facility in Colorado.
Speaker Change: For the full year free cash flow was $744 million or 25% of sales, resulting in a free cash flow to adjusted net income conversion ratio of 105%.
Speaker Change: With the strong free cash flow generation in our business model.
Speaker Change: We've made solid progress delevering our balance sheet.
Speaker Change: Net debt position is now approaching pre wired acquisition levels.
Speaker Change: In the fourth quarter, we reduced debt by approximately $200 million, resulting in approximately $900 million of BEC III premiums made in 2024.
Speaker Change: Our bamboo cadre net debt position was approximately $1 3 billion, which is net debt to EBITDA ratio of about one three times.
Speaker Change: We maintain a strong balance sheet access to liquidity and a real structured debt maturity profile.
Speaker Change: This strength allows us to prioritize investing in growth.
Speaker Change: To evaluate M&A opportunities that would enhance value creation for our shareholders well.
Speaker Change: We will also evaluate the resumption of our share repurchase program during the course of 'twenty 'twenty five.
Speaker Change: Now I would like to share further commentary on our 'twenty to 'twenty five outlook.
Speaker Change: Customer spending has shown steady signs of recovery in analytical instruments, particularly in downstream high volume settings that we serve.
Speaker Change: We expect these positive trends to continue into 2025.
Speaker Change: Our team is executing very well with our revitalized portfolio.
Speaker Change: Together with our resilient recurring revenue growth and supported by our ongoing impact of an idiosyncratic growth drivers, we anticipate achieving strong results again in 2025.
Speaker Change: These dynamics support full year 2025 constant currency sales growth guidance of.
Speaker Change: A four 5% to 7%.
Speaker Change: At current exchange rates currency translation is expected to result in a negative impact of 2% on full year sales. Therefore.
Speaker Change: And therefore, our total reported sales growth guidance is approximately two 5% to 5%.
Speaker Change: Within the P&L, we plan to counterbalance the impact of foreign exchange headwinds through continued robust operational performance.
Speaker Change: Staining of strong margin performance in <unk> 'twenty 'twenty five.
Speaker Change: We expect to deliver a gross margin of 59, 6% and an adjusted operating margin of 41, 2% for the full year.
Speaker Change: In both cases this represents 20 basis points of net year over year expansion net of 40 basis points of FX headwind.
Speaker Change: We expect our full year net interest expense to be approximately $46 million.
Speaker Change: Our full year tax rate is expected to be largely consistent with 'twenty 'twenty four levels at 16, 5% as we anticipate mitigating the incremental effects of pillar two including those relating to Singapore.
Speaker Change: Our average diluted share count is expected to be approximately $59 3 million.
Speaker Change: Rolling all this together.
Speaker Change: On a non-GAAP basis, our full year 'twenty 25 earnings per fully diluted share guidance is projected in the range of <unk>.
Speaker Change: $12 70.
Speaker Change: Two Canadian dollars, which is approximately 7% to 10% growth and includes an estimated headwind of approximately 4% due to unfavorable foreign exchange.
Speaker Change: Looking to the fourth quarter of 2025, our constant currency sales growth guidance is projected in the range of 4% to 7%.
Speaker Change: At current rates currency translation is expected to subtract approximately 3% therefore.
Speaker Change: Therefore, our total first quarter reported sales growth guidance is 1% to 7%.
Speaker Change: Oh.
Speaker Change: 1% to 4% first quarter of 2025 has two fewer days.
Speaker Change: In the first quarter of granite point before at the same time, the fourth quarter of 2024 at two additional days in the fourth quarter of 2023 based.
Speaker Change: Based on these dynamics.
Speaker Change: With our 4% to 7% constant currency sales growth guidance.
Speaker Change: Unexpected seven percentage points of currency headwind on earnings.
Speaker Change: First quarter non-GAAP earnings per fully diluted share is estimated to be in the range of $2 17.
Speaker Change: The $2.25.
Speaker Change: Now I would like to turn the call back to <unk> for closing comments.
Speaker Change: Thank you I'm all 2024 was a defining year for waters, we delivered excellent excellent sales and operational performance capitalize on the momentum of our new product launches and saw strong contribution from our idiosyncratic growth drivers there.
Speaker Change: Also made continued progress in our high growth Adjacencies as we look to 2025. There is a lot to be excited about we're coming out of the gate stronger than ever and market conditions that are beginning to recover we are confident in our ability to deliver enhanced value for our shareholders.
Speaker Change: With that I will turn the call back over to gas.
Speaker Change: Thank you that concludes our formal comments, Tony we are now ready to open the phone lines for questions.
Speaker Change: We will now begin the Q&A.
Speaker Change: I'd like to ask a question. Please is the right time feature at the bottom of your screen. If you have dialed in by telephone. Please pass down nine to raise your hand.
Amit Strengthen: Thanks, Amit.
Speaker Change: At the prompt you.
Amit Strengthen: ODM when called upon.
Speaker Change: As a reminder, we are allowing one question and one follow up.
Amit Strengthen: We will make amendments to allow the key to phone.
Tycho Peterson: Our first question comes from Tycho Peterson of Jefferies.
Speaker Change: Now on mute your line and ask your question.
Tycho Peterson: Alright cycle Peterson.
Speaker Change: So I'm wondering if you could talk a little more just on a.
Speaker Change: A couple of things one budget flush dynamics to what we thought he had pull forward here with the new administration and quantify any budget flush impact and then.
Speaker Change: On a replacement cycle, just talk a little bit about where we are in the process you've talked in the past that our customers bring it and procurement to the table.
Speaker Change: Widespread among your pharma customer base, and where do you think you'd go in terms of.
Speaker Change: I asked mix by the end of the year I know you talked it was 20, 20% in the fourth quarter and then the follow up is just capital allocation.
Speaker Change: 101, three turns leverage what's the appetite to resume share repurchases versus look at M&A and what's the appetite.
Speaker Change: Ladder for larger deals what can you say about Max leverage thresholds and appetite to issue stock.
Speaker Change: Thank you Tycho and good morning, Good morning, again look firstly on the on the budget flush 2024 was really almost a typical year, we saw a high teens ramp from Q3 to Q4.
And that was helped by the sales momentum that we saw at the end of the some rather typical budget flush if you want to call. It that now to your question on the replacement cycle look we finished the year extremely strong right. So high single digit of instrument growth and LTE as you mentioned.
Speaker Change: <unk> is now 20% of our HPLC sales really really solid performance.
Speaker Change: Pharma grew double digits to finish the year and driven by large pharma, where the replacement cycle has begun and the conversations as I mentioned in the last quarter are now quite widespread so double digit growth in pharma than the pharma segment, driven by large pharma initiating replacement <unk>, which are also starting to see good.
Speaker Change: Momentum and of course continued good performance in India in the genetics market and all of it.
Speaker Change: As I mentioned earlier is of course, driven by our late stage focus and QA QC and manufacturing where instruments are tied to instrument replacement is tied to sort of the usage and that scales with volume.
Speaker Change: And it's really helped and in no small part due to our due to our strong strong new portfolio, especially driven by alliance and the HPLC space. So feel very good about where we stand on the instrument replacement cycle in the funnel going into the year are very strong. So I expect really no change in.
Speaker Change: And what we're seeing from our customers. So I'll hand over now to them all to talk a bit about the capital allocation.
Speaker Change: Yeah look I mean.
Speaker Change: We continue to look at assets sort of align with our value acceleration Gordon's.
Speaker Change: Clearly, we've said, we don't mind going up to two and half times because.
Speaker Change: Because we can deliver pretty quickly as you've seen with wired.
Speaker Change: And most critically we wanted to be financially disciplined when we look at these targets and make sure sort of these assets are EPS accretive and create good high single digit Ottawa C at least.
Speaker Change: By year five.
Speaker Change: Thank you all.
Operator: Our next question comes from Vijay Kumar of Evercore ISI. Please on mute yourself ask your question.
Vijay Kumar: Hi, good morning.
Vijay Kumar: Thank you for taking my question Congrats on a really nice sprint sure, but maybe before I get to my questions. Just one maybe a small clarification.
Tycho Peterson: I would characterize Tycho are friendly crazy scientist that thing that has a bearing to it. So there you go Tycho.
Speaker Change: I guess, our view on the guidance here.
Tycho Peterson:
Tycho Peterson: This four five to seven.
Tycho Peterson: It's it's best in class, so far rate relative to tools.
Tycho Peterson: Some of your peers.
Speaker Change: How are you.
Speaker Change: Incorporating some of the macro related risks when they think about tariffs perhaps.
Speaker Change: Perhaps NIH.
Speaker Change: Spending cuts.
Perhaps potential cuts to agencies like EPA I'm, just curious on how that was baked into the guidance and I had one follow up.
Vijay Kumar: Sure. So thanks, Thanks, Vijay I think as you start talking about sort of cycle I should also say and I forgot to say it in the prepared remarks go Eagles.
Vijay Kumar: The Big Eagles fans. There. So just wanted to insert that before your before answering your question on the guidance itself.
Vijay Kumar: Look.
Speaker Change: We finished the year with high single digit growth right and and we saw strength in pharma double digit growth in pharma, we saw strength in A&D.
Vijay Kumar: New products new products with the.
Vijay Kumar: With the alliance is now almost 20% of the total revenue in Q4 for <unk> absolute now almost 50% of the total revenue and quantitative mass spec new products are doing extremely well and they are serving these idiosyncratic growth drivers DLP ones be fast testing.
Vijay Kumar: India genetics market. So it's a very good setup as we go into go into 2025, we expect the same sort of trends to continue now if you just look at the guidance, it's four 5% to 7%.
Vijay Kumar: Cutting revenues have grown 6% to 7% through all sorts of macro cycles right. So there's not much more evidence required there on what's going to happen there.
Vijay Kumar: So let's assume that that's the higher end of the guidance then instruments need to grow roughly four 5% for us to get to the midpoint of the guidance, finishing the year of instruments at high single digits with the replacement cycle really beginning in earnest across large pharma, where we've seen really good strength funnels are very strong I spent some time.
Vijay Kumar: With our sales team.
Vijay Kumar: Across across the global sales meetings are ongoing and there is a lot of excitement with our new portfolio Theres a lot of excitement in the discussions that are taking place, especially with large pharma and the <unk>.
Vijay Kumar: So feel very good about what we see in the finals.
Vijay Kumar: Products are gaining traction so same sort of trends are moving into into 2024.
Vijay Kumar: There is no reason why we should not be able to meet and exceed the lower end of the guide with all the positive trends that we're seeing so we built a bit of prudence on the lower end of the guide at four 5% and we will start to get more constructive as the year progresses. So I hope that gives you gives you some flavor of what we're thinking about.
Vijay Kumar: In the full year, so four 5% in the lower end.
Vijay Kumar: Sort of measures.
Vijay Kumar: Some measure of Prudence and as we see any sort of headwinds, we should be able to more than combated and meet the guidance.
Vijay Kumar: That's helpful and maybe one.
Vijay Kumar: A follow up on.
Vijay Kumar: When you think about the components guidance P. Fast G. L. P. One are we still assuming.
Vijay Kumar: 30 basis points of contribution how are you thinking about China, India within the guidance framework and not pricing contribution.
Vijay Kumar: Yes.
Speaker Change: Big question, Let me, let me try to let me try to address the idiosyncratic pieces. The DLP one in PFS first DLP ones I mean, we're going from strength to strength as you know we have 100% of call it 100% share in the columns.
Vijay Kumar: Usage.
Vijay Kumar: Have a significant share in an instrument usage and we are the number one player in online testing for DLP. One. So we do expect the 30 basis points to continue we have good line of sight on it be fast testing. We finished the year with 60 basis points of contribution to the overall growth, but were assuming four four.
Vijay Kumar: And the 2025 guidance of 30 basis points accretion. So both of them are 30, plus 30 in India is has contributed over 100 basis points in 2024, finishing the year, finishing Q4 at over 30% growth rate for the full year, India on a constant currency basis was over 25% growth rate. So we will do.
Vijay Kumar: <unk>, India will be at least 70 to 100 basis points accretive to the growth going forward China.
Vijay Kumar: We've sort of maintained our low single digit posture there right. So China Q4 came in as expected low single digit growth modest contribution from stimulus. We expect the same in 2025, so China as the stimulus comes in could could.
Vijay Kumar: Could give us give us a bit of an upside.
Vijay Kumar: And the last one on pricing closer to 200 basis points.
Speaker Change: Our next question comes from Puneet <unk> Leerink. Please <unk> your line and ask your question.
Speaker Change: Yeah, Hi, thanks for the questions here so.
Speaker Change: First of all.
Just wanted to touch on the first quarter guidance lower to 7% a little bit wider than historical patterns. I. Just wanted to clarify I know you talked about the full year guide, but just.
Speaker Change: Given the recent NIH cuts.
Speaker Change: Potential for academic freezing there and instrumentation in the near term sort of just help us understand how are you baking that in for the U S academic side and how should we think about the 4% versus the 7% I mean, the dynamics that needs to play out of the quarter already we are in Q1, So I'm sure you've thought about.
Speaker Change: <unk> setting to guide us to on the lower end versus the higher end, if you could elaborate a bit.
Speaker Change: Yes, so look I mean in Q4, we grew 8% in constant currency keep in mind Q4 benefited by two extra days, which is roughly 1% extra growth.
Speaker Change: And then Q1 this year has two less days, so sort of Hasbro rewards dynamic so net net where we are guiding at the midpoint roughly in line with how we performed in Q4 due to good days impact right now the guidance range is slightly larger than usual, which as you can appreciate.
Speaker Change: Given all the uncertainties sort of that overhang the situation and with Q1 being our smallest scalper.
Speaker Change: Ourselves some prudence and caution in situations, where some of these uncertainties were to materialize and if they do materialize. We end up at the lower end of our guidance. If they don't we ended up at the higher end of our guidance.
Speaker Change: And thats on the sales side and then keep in mind I mean dollar strengthened so significantly.
Speaker Change: Through the course of Q4, if now creates a 7% earnings headwind in Q1, and so when you grow 4% to 7% on our 7% FX headwind on earnings.
Speaker Change: You sort of EPS, that's flat or slightly better than flat and thats, where the EPS guidance and maybe just to embellish a little bit on little bit on EPS in Q1, Puneet I mean as I mentioned earlier I mean this is the time for growth for waters, we're seeing incredible growth across our key customer segments. Our sales meetings are back and we wanted.
Speaker Change: Invest invest in training our folks people are very excited about the traction of the new products are gaining.
Speaker Change: Very excited about the chemistry piece, and we're investing and ensuring that our folks are trained our sales teams are trained so.
Speaker Change: So we're continuing to invest.
Speaker Change: Even in Q1 and Q1 is again as I mentioned is the smallest quarters of sales sales meetings are back and basically investing for growth.
Speaker Change: <unk> already in Q1.
Speaker Change: Got it that's helpful and then if I could double click on both Europe, and India Europe. If you could just elaborate some of the dynamics there budget flush pharma versus non pharma and then also.
Speaker Change: Specifically on India, I would love to get your thoughts on.
Speaker Change: 70 to 100 bps contribution again strong strong throughout 2024.
Speaker Change: How do you how are your India team and yourself, how are you thinking about the patent cliff opportunity here.
Speaker Change: And how should we think about that opportunity getting layered into the growth algorithm over the next few years.
Speaker Change: Yes, let me, let me start with India, and then we'll do Europe second very pleased with both of those end markets, but looking at Indiana.
Speaker Change: I said, India, Q4 was 34% constant currency growth.
Speaker Change: And for the year, 27%, India is now a meaningful contributor to waters at over 8% of our total sales. So really feel good about what the team has been doing on the ground. We are the market share leader in the key genetics companies in India and our columns.
Speaker Change: Our instruments are used their alliance is also doing well we have the highest service attachment rate. There. So really feel good about what we're doing on the ground from an execution standpoint looking ahead.
Speaker Change: The genetics to <unk> opportunities very significant rates or 240 billion of revenues will go off patent over the next five to seven years, India continues to supply roughly 50% of the global genetics market and over half of that 240 250 billion is a small molecule so that.
Speaker Change: Fits right into the current business model that exists and half of it is biosimilars, which is now developing in many of these many of these markets. So feeling good about the opportunity going forward and just to give you a case in point similar genetic validation is expected to hit sometime in 2026 and the top genetics players are already working with us.
Speaker Change: To adapt and adopt the processes that the key innovators have been using them all you want to start with Europe.
Speaker Change: We are executing super well right, 11% growth it's across the board.
Speaker Change: Double digit growth in pharma high single digit growth in industrial.
Speaker Change: Double digit plus growth in G instruments growing high single digit plus so.
Speaker Change: Our teams are executing together with a refreshed portfolio together with so mark that youre seeing that the growth opportunities like <unk>, but bemis, capitalizing really well and what's out there and I mean, just to sort of build on that.
Speaker Change: Europe is Europe has been doing extremely well for the full year and finished the year extremely strong the academic segment at the end of the year, usually sees a significant budget flush and we did and as I mentioned earlier to <unk> question look I mean 2024 was a typical year for us with a budget flush sort of going back to.
Speaker Change: What we've seen in historic times, so really good finish to the year in Europe, and very very excited about how the year started there with good conversations across different customer segments.
Speaker Change: Our next question comes from E. That's fine at <unk>. Please on mute your line for asking a question.
Speaker Change: Great. Good morning, Thanks, so much for taking my question.
Speaker Change: We talked a lot about.
Speaker Change: Hi, Tom.
Speaker Change: And.
Speaker Change: The opportunity for 2019 to 2024.
Speaker Change: Today's conference in January to instrument.
Speaker Change: <unk> is.
Speaker Change: It's progressing well outlet so 15% of lab 20, 15% to 2019 replacement opportunity remaining.
Speaker Change: So how does that number compare.
Speaker Change: Range.
Speaker Change: When you are coming out of again starting in satcom.
Speaker Change: Essentially.
Speaker Change: Is that better or worse.
Speaker Change: How much of that replacement opportunity in China.
Speaker Change: It's a good question Neil and thanks for paying specific attention to those separate drivers. So just to sort of clarify for everyone that are two different instrument growth drivers. One is the pent up demand for replacement, where there was deferred replacement that took place in.
Speaker Change: In the 'twenty two 'twenty three 'twenty four timeframe and the placements were deferred from that timeframe to a bit later.
Speaker Change: So that's what we're calling the replacement cycle that is a standard cycle that occurs in the industry and during that time.
Speaker Change: We see a 2% 3% outperformance in instrument growth rate versus the 5% average over the long term right. So that's what we're calling the replacement cycle. The signs of that are rather clear when you talk to customers because the meetings that take place or a larger number of people. They are planning a multiyear replacement procured.
Speaker Change: Procurements in that discussion it sits in that discussion the lab managers it in that discussion and a whole bunch of folks from our sites at in those discussions and those are widespread across the industry right.
Speaker Change: Right now and so we're seeing very good traction on that what you asked about is the 15% that is pending from the transformation that we began in 2020 in 2021 and there you'll recall, we had said look.
There are roughly 13000 instruments that should've been replaced in the 2018 to 20 timeframe that got deferred and we worked very hard to replace them into 'twenty, one and 'twenty two but the macro cycle slowdown in 'twenty to 'twenty, two 'twenty, three and 'twenty four and that 15% is still pending so we have a database and our CRM system and we track.
Speaker Change: Diligently Dave So people don't forget that that 15% is still pending so you can superimpose the tool I didn't want us to now go crazy sort of with instrument growth rates.
Speaker Change: I was trying to bring the two together, but in a CRM system, we have that tracked really diligently so I hope that clarifies the replacement question on China.
Speaker Change: We've assumed a low single digit growth I mean market conditions have improved over the year, but we've assumed that it's still muted.
Speaker Change: There is an impact of the stimulus expected in 2025 again, there we've been modest we've assumed a sort of a low to mid <unk> mid to high single digit single mid to high single digit millions.
Speaker Change: <unk> contribution for the year, So we expect China to remain solid.
Speaker Change: At least in the guide remains the same and if Theres no stimulus and more replacement, we should see more dynamic.
Speaker Change: More dynamic growth.
Speaker Change: That's great. Thanks, a lot for clarifying.
Speaker Change: One.
Speaker Change: Just on pricing.
Speaker Change: Thank you Ms concert.
Speaker Change: Yes, just to clarify was that the contribution for granting <unk> and so on.
Speaker Change: I'll start with 225 died.
Speaker Change: And are you, including the effect of a double upgrade.
Speaker Change: Contribution.
Speaker Change: And how much is that.
Speaker Change: Yes, so look I mean, when we got pricing, it's always like for like SKU like for like geography does not include the benefits of the upsell.
Speaker Change: <unk> 24 was close to 200 basis points contribution and Thats in line with what we have in our 25 guide.
Brandon: Our next question is from Brandon <unk> at Wells Fargo.
Speaker Change: Your line and ask your question.
Speaker Change: Thank you very much.
Speaker Change: I think he talked about instrument growth this year or four 5% just curious how that comparisons when LC mass spec and lights gathering and any details you can give us on what you've assumed in terms of growth across the three end markets.
Speaker Change: I think you should assume sort of mid single digit ish for all three so mass spec at 4%.
Speaker Change: In that four 5% number LC at five da at five and light light scattering somewhere thereabouts also quite a bit higher than that since it's accretive probably closer to double digits, but it's such a small portion of the business.
It doesn't make a huge difference at this point.
Speaker Change: And Brandon even at Refinished side, Ben and just to clarify even as we finished the year.
Speaker Change: Instrument segments grew at minimum high single digits, So LC mass spec and why it was well into the double digits.
Speaker Change: Yeah.
Speaker Change: Got it in the European gas market sizing continues to walk out now youre talking about $400 million opportunity. Prior it was kind of 300 to 350, what's enabling.
Speaker Change: You did grow so much faster than the underlying market, whereas that developing most rapidly either by application or region right now.
I think it's so the market itself has significant unmet needs right. I mean, we started with the environmental market than it has expanded into food testing step by step.
Speaker Change: <unk> customer segment also purchases instruments to to quantify NSS be fast so very dynamic market and you're right. The market size continues to increase as more and more applications come in we've grown almost double the market growth rate and it's driven first by having the best in class instrument, because DFAST testing remember.
Speaker Change: It is not just one molecule it's over 40 already classify as classified as B P. Fast all of these need to be quantified.
Speaker Change: And the regulators keep increasing the sensitivity requirements and we have the most sensitive instruments in the market with the lowest environmental footprint and that's worked extremely well in the hands of our customers. So the number one driver is the success of the zebra <unk> absolute and which now is in Q4 was 50% of the revenue of quantitative mass spec so highly highly.
Speaker Change: Successful launch driven not just by the differentiated differentiation, but also the commercial excellence and equally our teams that are investing a ton of energy in the compliant informatics segment the waters connect.
Speaker Change: <unk> informatics software it is doing very well in regulated settings remember our history and legacy is in compliance settings, where data integrity is of a premium. So we've taken what we've learned from empower adopted it into waters connect and that's working very well and that in the DFAST regulated segment, and then finally chemistry and.
Speaker Change: We continue to launch new chemistry, a new workflows to.
Speaker Change: To really keep up with the complexity of different DFAST molecules so across the board.
Speaker Change: The market size is expanding.
Speaker Change: Largely because of application sets so feel very good about where we sit there.
Speaker Change: Our next question is from Don and Ross at Stifel. Please press Star nine to mute your line and ask your question.
Don: Hey, good morning, guys. Thank you can you just maybe expand on that pizza idea a little bit.
Don: To what extent do you still see there being additional capacity needs in the lab based on the water testing side.
Don: In the U S. Because I know to your point application expansion geographic expansion is important but I'm just sort of trying to understand.
Don: What you've done in 2024, when it comes to scaling up these labs in order to test on the water side in the U S. Specifically.
Don: That's a good question Dan.
Don: It's early days still right I mean, when you look at PFS testing and this is something we will spend some time at our investor day, as well breaking down the different segments that have constituted growth by the academic segment the first round.
Don: <unk> spent a lot of time and energy and we had very good sales in that segment, helping people understand what the heck DFAST really is developing methods that could get standardized and then be disseminated second to public health laboratory to water testing the water trees and then the last piece is is the second the last piece is what.
Don: Testing laboratory is across.
Don: Across the country and the final one is is people who have to do remediation. So when you think of DFAST testing, it's not just contract testing labs. It's also academic labs, which started first then it's.
Don: And then it's public health labs that set set standards.
Don: Then it's then it's contract testing organizations like water testing and then finally people who have to remediate be fast out. So we're in the very early innings of the penetration and as I said, we'll talk more about it at the Investor day, but we're outpacing the market quite significantly.
Speaker Change: Okay. Thanks for that.
Speaker Change: Just on the mass spec side, I mean to what extent do you feel like the uptake there is partly a function of or being helped by the LC replacement cycle in other words, if you look at LTE.
Speaker Change: <unk> combo purchases now versus prior periods.
Speaker Change: Do you see and what is sort of embedded in that.
Speaker Change: That mass spec growth rate that youre talking about for this year and mid single digits. When it comes to just sort of.
Speaker Change: And that being driven by LC uptake versus performance and new platform introductions et cetera. If that's something that you can kind of speak to your Texas, Yes look I mean done mass spec update uptake is not meaningfully impacted by LC replacement lot of LC replacement is happening.
Speaker Change: In manufacturing QA QC Red LC sort of operates largely stand alone.
Speaker Change: And what is helping mass spec meaningfully as various vectors that have come together based on our revitalized portfolio as Rick mentioned that your absolute is doing exceedingly well not just in <unk>, but across the applications in food and pharma space as well as well as in clinical.
Speaker Change: You have something like <unk> doing well in bio analytical characterization you have some of the newer launches on the higher Ed space that are key.
Speaker Change: Gateway into very specific needs and that they are doing exceedingly well on those obligations and that's why you see sort of the kind of growth you're seeing on mass spec.
Speaker Change: <unk> not driven by LC replacement.
Speaker Change: I mean, just to elaborate on that a little bit. It's the two dimensions right. So it's the different pieces of mass spec that are individually contributing due to renovation to be a DFAST testing.
Speaker Change: Sure.
Speaker Change: Be it mass spec usage in Juneau docs impurity testing in pharma base mass spec testing and this is only the <unk> absolute and clinical and then of course, there's the <unk>, which is which is doing extremely well and does evo NRT, which is a new product.
Speaker Change: That is on the hydro side, so you'll see the innovation the innovation contributing and then that has helped on the customer dimension by a.
Speaker Change: Our strong growing segment like be fast.
Speaker Change: It has helped to some extent by late stage development.
Speaker Change: <unk> is significant with significantly for quantitative assessment of different types of biologics.
Speaker Change: You will see that two dimensions, working very well from our spec innovation as well as the different customer segments and not only due to the LC replacement cycle and as <unk> mentioned thats, mostly in LTE will be a link for small molecules.
Speaker Change: Okay.
Speaker Change: Our next question from Mac Sykes at Goldman Sachs, Matt. Please mute your line and ask your question Hi.
Hi, This is <unk> on for Matt. Thanks for taking my questions. So the first one you've seen impressive growth and services can you talk to the benefits of Euro empower software and then any particular application areas, where you see higher attachment rates and then any leverage or using Tim.
Speaker Change: Tim for you of that going forward.
Speaker Change: Yes, I mean look more to recurring revenues are equal.
Speaker Change: Our recurring portfolio approved spotlight because even in this downturn than most other recurring portfolios have been flat or low single digits, we've been rock solid at 6% to 7% growth and what sort of contributing to that is our unique position with empower coupled with how well we've done with service attached.
Speaker Change: <unk>, where our net promoter scores are on salaries are launches in bio separations columns as well as the progress that we've made on our e-commerce with chemistry consumables and that sort of what is driving this rock solid 6% to 7% recurring revenue growth.
Speaker Change: Great and then can you talk through the strength you saw in the academic and government section. This quarter and then what your expectations are going into 2025 any potential impact from NIH risk.
Speaker Change: Yes, I mean look our Q4 was very strong from an LNG perspective.
Speaker Change: <unk> benefited from the typical budget flush dynamics, particularly in markets like Europe.
Speaker Change: Also saw some initial orders getting converted on stimulus in China.
Speaker Change: But again longer term this market has traditionally been.
Low single digit at best mid single digit grower right and it's really choppy. So you can't really count on this trend.
Speaker Change: As we get into 'twenty, five we will benefit from the stimulus in China, but again there are so many puts and takes there. So we've put a very prudent assumption in our guide and if it plays out better or that would be an upside.
Speaker Change: We don't have much direct exposure to NIH funding very little actually less than 1%. So we're not exposed to that dynamics because our primary business is far more in industrial.
Speaker Change:
Speaker Change: It's a small portion of our business around 10% and we continue to monitor the dynamics and just to sort of finish up and then for 2025, we've assumed low single digit growth in the anti data not the dynamism that we saw in Q4, especially in pharma, we've not assumed that at all in <unk> for the for 2025 guide so it's a low single.
Speaker Change: Digit grower.
Speaker Change: Our next question is from Dan Brennan at TD Cowen.
Speaker Change: Please mute your line and ask your question.
Dan Brennan: Terrific. Thank you. Thanks for the question guys, maybe just a first one on instruments just for the guide I think you said, 4% for 2025, just confirm that maybe shows a little conservative and if you could speak to.
Dan Brennan: You've highlighted this five year CAGR and this 5% normalization, so where did we ended up <unk> 24, and kind of what's implied on 25 and kind of any reason why the.
Dan Brennan: Kind of the improvement you're expecting in 'twenty five is that on a normal trend line or is it above or below.
Speaker Change: So thanks, Dan look we've assumed.
Speaker Change: The four five that the range is four 5% to 7% for the full year and just to repeat what I started with the 7% 6%, 7% you should assume is what we think is the recurring revenue and you can imagine you can see why that that is a pretty pretty stable and rock solid assumption.
Speaker Change: Instruments need to grow for four 5% for us to get to the midpoint of the guide now. Your question is a good one I mean, we finished the year with high single digit growth in instrument.
Speaker Change: The funnel is extremely strong and the conversion looks extremely strong, especially led by pharma, where we're seeing very good traction of our alliance I S.
Speaker Change: Instrument to sort of support the replacement cycle, we are seeing.
Speaker Change: Socratic drivers contributing nicely.
Speaker Change: As you look at look at 2025, the way I would look at it is we will start to get more constructive as the year goes on it will start to reveal more information because at this point, we feel very optimistic we see good funnels.
Speaker Change: Q1 is our smallest quarter, we just want to get more information before we started sort of saying Hey, you know, it's going to be another 8%, 9% a year four instruments typically NDA right again to point out typically when we come out of a trough in instrument replacement, we usually see a 2% to 3% outperformance versus the long term average which is 5%.
Speaker Change: Going back to the CAGR is the long term averages, 5%, usually when you come out into the replacement cycle, you'll start seeing a 2% to 3% outperformance all signs are pointing in that direction. We just wanted to start the year with a bit of a bit of prudence and derisk. It as the year goes on AMOLED anything that Gianluca whichever way you look at.
Speaker Change: At area under the curve CAGR.
Speaker Change: Average fleet life, and even if you exclude China for U S and European markets. There is a meaningful catch up opportunity from each of these analytical viewpoints I didn't receive that in the dialogue with large pharma the dialogue.
Speaker Change: <unk>, who is starting to improve.
Speaker Change: The one thing one has to keep in mind. These not every part of our customer base is recovering we'd sell these days right. We still have biotechs, we still have.
Speaker Change: <unk>.
Biotech research these things Howard recall, our China pharma hasnt recovered to a level it needs to so the ramp of this replacement cycle will not be as steep as historical but the length or the duration of this replacement cycle is likely going to be longer just because eventually.
Speaker Change: All of these lagging segment of the market have to come back and replace their aging instrument fee.
Speaker Change: Great and then I know there was one question on India, but maybe just one follow up since it is so strong for you right now I think I heard you say over 25% growth in 'twenty, four or 100 basis points contribution.
Speaker Change: With reduced staff.
Speaker Change: Then we lost you.
Speaker Change: Let's proceed to our next question Oscar please.
Speaker Change: Our next and final question is from Catherine Schulte.
Speaker Change: Please mute your line and ask a question Catherine Thank you.
Speaker Change: Hey, guys. Thanks for the questions, maybe just first on farmer Mac, great to see that return to double digit growth. This quarter, maybe just to go back to take those questions is there a way to quantify the stronger budget flush dynamic in the quarter and what are you assuming for pharma across both for the first quarter and full year.
Catherine: Yes, so catherine.
Catherine: For the for Q4, I mean, it was a as I said very strong growth, we're very happy with it really supports our late stage focus but as you look at Q4. The ramp was typical to the pre pandemic years right. So high teens.
Catherine: Those 20% from Q3 to Q4, so normal budget flush dynamic not more not less right. So it's stronger than what we saw last year and the year before but.
Catherine: Starting to trend towards a normal length to a normal which.
Catherine: Normal level, which is consistent with how pharma.
Catherine: <unk> pharma is behaving QA QC spending so if we start to see anomaly.
Catherine: Normalization of behavior behavior there.
Speaker Change: And then maybe just on the services side, you mentioned over 50% of the active installed base now has a service contract in place I believe your target is to get that converted. So can you just talk to where you think that can go throughout the year.
Speaker Change: Yes look I mean.
We're very happy with the progress that we've made and every year, we start with a goal and we ended up with hearing bubble that goal in the year.
Speaker Change: <unk> and <unk>.
Speaker Change: Keep in mind. This is just based on <unk>.
Speaker Change: Instrument install base out there. It doesn't include the first year instruments that are in warranty. So when you add that to almost 60% of our installed base with either under warranty or under our service plan.
Speaker Change: <unk> five is a good goal to go great and you know we are starting to make progress in the last remaining areas like China and then again you know a lot.
Speaker Change: A lot of the focus on brewer.
Catherine: Our service organization into the next big thing reduced sort of how do we get so rich lead Gen and we've made tremendous progress in markets like U S and India, where the attachment rate is very high and they have these organizations are already pivoted to their next biggest call, which is lead gen and revenue conversion and thanks Katherine for that for that question and I think we're coming to the end of the call.
Catherine: I want to make sure everybody everybody remembers that March 5th is the Investor Day in New York City, and we look forward to elaborating on the service question and use of AI in service use of AI internally and externally and many other many other areas, but let me conclude by saying we're very excited about how we finished 2024.
Catherine: We're entering this new phase of growth with a lot of momentum, especially on our instrument portfolio. The recurring revenues are growing like a Swiss clock, we've said that before.
Catherine: Instrument revenues at the instrument growth as is now really kicking into gear with the replacement cycle, beginning with the new product portfolio, gaining a ton of traction with the idiosyncratic growth drivers contributing and we feel very good about where the way we are starting the way. We're starting 2025 look forward to seeing you at.
Catherine: The Investor day, and thank you all for joining us today.
Catherine: Okay.