Q4 2025 Waters Corp Earnings Call

February 9, 2026

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Good morning, good morning to the waters Corporation, the water quarter 2025 financial results Conference call. All participants will be in listen only mode until the question and answer session begins. This call is being recorded if anyone has any objections. Please disconnect. At this time. It is now my pleasure to turn the call over to Mr. <unk>.

Amol Chaubal: Good morning. Good morning. Welcome to the Waters Corporation Amol Chaubal 2025 Financial Results Conference Call. All participants will be in listen-only mode until the question-and-answer session begins. This call is being recorded. If anyone has any objections, please disconnect at this time. It is now my pleasure to turn the call over to Mr. Caspar Tudor, Head of Investor Relations. Please go ahead, sir.

Operator: Good morning. Good morning. Welcome to the Waters Corporation 2025 Financial Results Conference Call. All participants will be in listen-only mode until the question-and-answer session begins. This call is being recorded. If anyone has any objections, please disconnect at this time. It is now my pleasure to turn the call over to Mr. Caspar Tudor, Head of Investor Relations. Please go ahead, sir.

Spur tutor head of Investor Relations. Please go ahead Sir.

Caspar Tudor: Thank you, Leila, and good morning, everyone. Welcome to Waters Corporation's Q4 earnings call. Joining me today are Dr. Udit Batra, our President and Chief Executive Officer, and Amol Chaubal, our Senior Vice President and Chief Financial Officer. Before we begin, I will cover the cautionary language. In this conference call, we will make various forward-looking statements regarding future events or future financial performance of the company, including the expected financial and operational impact of Waters' combination with the biosciences and diagnostic solutions business of Becton, Dickinson, and Company. We will provide guidance regarding possible future results as well as commentary on potential market and business conditions that may impact Waters Corporation over the Q1 of 2026 and full year 2026. These statements are only our present expectations and are subject to risks and uncertainties.

Q4 2025 Waters Corp Earnings Call

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Q4 2025 Waters Corp Earnings Call

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Monday, February 9th, 2026 at 1:30 PM

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Caspar Tudor: Please see the risk factors included within our Form 10-K, our Form 10-Qs, our other SEC filings, and the cautionary language included in this morning's earnings release. During today's call, we will refer to certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP measures are attached to our earnings release and in the appendix of the slide presentation accompanying today's call. Unless stated otherwise, references to quarterly results increasing or decreasing are in comparison to the fourth quarter of calendar year 2024. In addition, unless stated otherwise, all year-over-year revenue growth rates and ranges given on today's call are on a comparable constant currency basis, and all quarter-over-quarter revenue growth rates and ranges are on a comparable constant currency basis. Finally, we do not intend to update our guidance, predictions, or projections except as part of a regularly scheduled earnings release or as otherwise required by law.

Udit Batra: Thank you, Caspar, and good morning, everyone. We delivered a strong finish to the year, achieving high single-digit reported revenue growth and low double-digit adjusted EPS growth in Q4. This reflects yet another quarter of industry-leading sales growth. Today also marks a transformative step forward as we complete the acquisition of BD's biosciences and diagnostic solutions business. We're uniting world-class expertise across chemistry, physics, and biology into a scientific powerhouse with category-defining brands and a shared culture of pioneering innovation. We look forward to welcoming our new colleagues later this morning. It also marks the point at which we will have full operational control over the BD business. With months of rigorous integration planning behind us, we're now moving immediately into execution, applying the same focus and discipline that have driven exceptional results at Waters. We're entering this chapter from a position of strength.

Udit Batra: Throughout 2025, we have advanced the strategic roadmap that we laid out five years ago. Commercial execution continues to strengthen with KPIs running ahead of the commitments we made at our March 2025 Investor Day. Innovation remains a powerful growth driver as we launch a new wave of pioneering innovation. Our unique exposure to high-volume testing opportunities across GLP-1s, PFAS, and India generics again outpaced expectations. We secured key wins in our transition to Empower as a subscription-based model, and we continued to expand deliberately into high-growth adjacencies like bioseparations and bioanalytical characterization. These outcomes reflect the strength and discipline of our simple, repeatable business model serving high-volume, regulated growth markets. They also reflect the dedication of our team, whose focus on customers, science, and operational excellence continues to differentiate Waters.

Udit Batra: Now turning to the quarter, as reported sales and adjusted EPS landed at the high end of our guidance range. Sales grew 7% on a reported basis and 6% in constant currency, driven by high single-digit growth across our pharma and industrial end markets. Adjusted EPS grew low double digits to $4.53. On a GAAP basis, EPS was $3.77. Recurring revenue grew 9%, led by chemistry growth. Instruments grew 3%, led by, yet again, high single-digit LCMS growth. TA instruments declined for the quarter due to cautious spending in the US and Europe. During the quarter, we achieved strong wins in our transition to a subscription-based model for Empower, with successful adoption across multiple large pharma customers. While this reduced our overall instrument growth rate by a low single-digit percentage for the quarter, it reflects a strategically attractive shift to a model with superior economics.

Udit Batra: Together with our new feature releases, this supports accretive tailwinds in 2027 with the incremental recurring revenue that it brings. For the full year, sales grew 7% on both a reported and constant currency basis. Recurring revenue grew 8%, driven by 12% growth in chemistry. Instrument revenue grew 5%, led by LCMS, which grew high single digits or better every quarter of the year. Adjusted EPS grew 11% to $13.13, supported by top-line strength, operational excellence, and effective tariff mitigation. GAAP EPS was $10.76. Let me now highlight the drivers behind our strong performance and why we expect the strong momentum to continue into 2026. Starting with commercial execution, our KPIs continue to run ahead of external commitments, and we're progressing well towards our long-term targets. Within instrument replacement, momentum continues to build.

Udit Batra: Instrument growth is now tracking at 2.5% CAGR approximately versus 2019, up roughly 100 basis points since the start of the replacement cycle. This reflects a steady mean reversion towards a long-term historical instrument growth rate of 5%. Service plan attachment increased to 54%, reflecting approximately 400 basis points of improvement in a single year. This is the strongest annual expansion we have ever delivered and sets us up for above-average service growth in 2026, supported by the associated revenue pull-through. E-commerce penetration reached approximately 45% of consumables revenue, driving a growth tailwind along with new products across our chemistry portfolio. Contract organizations now represent 27% of pharma sales, up from 15% five years ago, positioning us well among diversified sources of CapEx. Innovation is also augmenting our results.

Udit Batra: Strong growth from new products launched over the past several years has continued to compound alongside a new wave of innovation launched throughout 2025. For the full year, Alliance iS HPLC sales more than doubled, reflecting strong adoption of our flagship platform, which reduces errors by up to 40% in QC labs. Xevo TQ Absolute mass spec platforms grew over 30%, driven by PFAS demand and the launch of the Xevo TQ Absolute XR, which sets a new benchmark for robustness together with class-leading sensitivity. MaxPeak Premier chemistry grew over 35%, underscoring the significant impact our technology has brought to the industry for larger and more complex molecules. Our successful strategy of entering high-growth areas further enhanced our results in 2025. In bioanalytical characterization, adoption of light scattering and BioAccord continues to build in pharma process development and quality control applications.

Udit Batra: With the launch of Xevo CDMS, we are now expanding this position to routine characterization of mega-molecules such as ADCs and viral vectors. In bioseparations, we built on the success of MaxPeak Premier Inert Surfaces with a new generation of products designed to separate complex large molecules. These include SEC columns for viral vectors, slalom chromatography for large oligonucleotides, and affinity-based separations using specific antibodies. These new products have accelerated chemistry growth to double digits in 2025, meaningfully above our 7% historical average growth rate. For LCMS into diagnostics, we have continued to grow our assay menu, launching IVD products covering 12 new analytes in endocrinology and 4 new analytes in therapeutic drug monitoring over the past 2 years. Turning to our idiosyncratic growth drivers. In 2025, these drivers contributed more than 300 basis points of growth, all tracking ahead of our commitments.

Udit Batra: GLP-1 testing-related revenue more than doubled, contributing approximately 100 basis points of year-over-year growth. This reflects continued wins in development and manufacturing across the globe, supported by our SPE position for both oral and injection-based doses. PFAS testing growth remained robust, increasing more than 40% year-over-year and adding roughly 80 basis points of growth. Demand was broad-based, driven by an expanding regulatory landscape that is evolving towards food, materials, and consumer product testing. India, again, delivered strong performance. Ex-GLP-1 revenue grew low teens, increasing by approximately $40 million and contributing around 130 basis points of growth tied to the ongoing patent cliff of blockbuster drops. Taken together, we grew 7% in 2025 with all regions delivering mid-single-digit growth or better. Pharma revenue grew 9% with high single-digit growth across Americas and Europe, and low double-digit growth in Asia. In non-pharma end markets, industrial grew 6% while ANG declined 1%.

Udit Batra: In China, we grew 9% for the year. Our team delivered exceptional performance by capturing renewed momentum in biotech and CDMOs, executing well in food and environmental applications, and winning a series of academic and government stimulus send-offs. As we now move into 2026, we expect continued organic strength supported by the instrument replacement cycle and contribution from new product innovation. We're also expanding our idiosyncratic growth driver framework from three drivers to five. In addition to GLP-1s, PFAS, and India generics, we're adding biologics and informatics. Biologics reflects future growth linked to bioseparations and bioanalytical characterization from progress we've already made in our high-growth adjacencies before the closing of the transaction. In bioseparations, we anticipate sustained strength driven by new chemistry products already launched and in our near-term roadmap serving large molecule and novel modality applications.

Udit Batra: In bioanalytical characterization, we anticipate continued placement of LC-MS, MALS, and CDMS in process development and in QA/QC. There is potential upside beyond our current assumptions, supported by the FDA's draft biosimilars guidance, which could drive incremental demand by shifting approvals towards comparative analytical assessment rather than clinical outcome studies. For informatics, this reflects the future expected incremental growth linked to the phased transition of Empower from our legacy license-based model to our subscription-based offering. As we have shared previously, we expect to take our informatics business from its present revenue base of approximately $300 million to approximately $500 million by 2030. The move towards subscription comes with a shift in revenue timing. Under this transition, revenue is recognized consistently over the life of the contract rather than upfront.

Udit Batra: For a typical customer converting to subscription, the breakeven point where cumulative subscription revenue equals the prior license value is reached in approximately 18 months. From that point forward, it adds incremental high-quality recurring revenue with long-term visibility and margin benefits. We're executing this change gradually and expected to become a more positive structural driver in the years ahead, beginning in 2027. Taken together, these five drivers are expected to contribute over 200 basis points of annual revenue growth accretion on a standalone basis between now and 2030. Turning now to our integration of BD Biosciences and Diagnostic Solutions. This combination is a significant value creation opportunity that further adds to our attractive trajectory across two main dimensions. Firstly, it strengthens our position in high-growth adjacencies across bioseparations and bioanalytical characterization by adding critical technologies and expertise.

Udit Batra: It also adds to our LC-MS diagnostics business with day-one commercial scale, customer channel access, and automation capabilities. Secondly, it provides a meaningful execution uplift opportunity. By applying our operating discipline across instrument replacement, e-commerce adoption, and service attachment, we expect to replicate the same growth acceleration that we have successfully achieved in our existing businesses. Together, this positions Waters for sustainable, high single-digit growth over the long term and well beyond the current instrument replacement cycle. The transaction also yields attractive cost synergies. Our baseline plan represents less than 5% of the combined cost base with the potential to exceed that level, consistent with market benchmarks for deals this size and prior large-scale integrations that our leadership team has successfully executed. To ensure we capture this value quickly and consistently, we have aligned the organization around a new operating structure.

Udit Batra: We have organized Waters into four divisions, where each follows our repeatable business model with simple yet sophisticated instruments, compliant software, customized consumables, and world-class service. This structure enhances accountability and will provide investors with a clear, transparent view into the performance of all our key segments across the company. First, Waters Analytical Sciences, formerly known as Waters Division, will continue to be led by Rob Carpio, who you all know well. The division comprises LC mass spec, light scattering, and particle analysis together with our Empower informatics platform, chemistry consumables, and our service team. Going forward, revenue from Waters' clinical business will be reported within our advanced diagnostics division. Waters Biosciences, formerly BD Biosciences, will be led by Steve Conly, who has led the business for the past three and a half years and has played a key role in the launch of its next-generation flow cytometry platforms.

Udit Batra: The Waters Biosciences division consists of leading flow cytometry brands like BD FACSDiscover and BD FACSLyric, the BD Horizon Real Dyes brand of fluorescent dyes and reagents, and FlowJo Software. Waters Advanced Diagnostics will be led by Jianqing Bennett, who has been running our clinical and TA business unit over the past several years and has transformed the top-line growth profile of these businesses. Jianqing has a strong background in diagnostics, having served as senior vice president of high-growth markets at Beckman Coulter Diagnostics before joining Waters. The Waters Advanced Diagnostics division consists of leading microbiology testing brands, including BD BACTEC, BD Phoenix, and BD Kiestra, as well as molecular diagnostics solutions with the BD MAX and BD COR platforms, LC-MS-based solutions, and point-of-care testing. Waters Material Sciences, formerly TA division, will be led by Dan Rush on an interim basis while we appoint a successor to Jianqing.

Udit Batra: Dan is our Senior Vice President of Strategy and Transformation and has a long history of leading commercial and strategy teams. He served as Vice President of Worldwide Commercialization Strategy and Innovation at Bristol-Myers Squibb before joining Waters in 2021. The Materials Sciences division consists of products, services, and informatics spanning a diverse range of materials characterization techniques, including thermal analysis, rheology, and microcalorimetry. These are used in a range of applications such as battery testing for electric vehicles, pharma, and medical devices. Together, these businesses bring leading scientific capabilities serving customers in high-volume regulated applications. They're anchored by a shared operating model that leverages category-defining brands and a universal culture of pioneering innovation. In parallel, we have aligned early execution priorities to hit the ground running now that we are gaining full operational control of the biosciences and diagnostic solutions business.

Udit Batra: With several months of integration planning behind us, we have a clear line of sight to the initiatives that will drive the most value in the early innings of the integration. In the most recent quarter, BD Biosciences and Diagnostic Solutions results came in below expectations due to impacts that became apparent during the quarter. In China, demand weakened due to increased focus on reducing consumption in diagnostics testing, while the US government shutdown affected the biosciences business as export approvals got delayed. At the same time, the point-of-care business was impacted by a milder flu season compared to the previous year. As we look ahead, our cost and revenue synergies are firmly on track. In 2026, we will make swift and decisive progress towards achieving the objectives we've laid out.

Udit Batra: On cost synergies, restructuring, procurement savings, and network optimization are key vectors that we expect to begin realizing this year. As a prudent starting assumption, we expect to realize approximately $55 million of adjusted EBIT from cost synergies in 2026. On revenue synergies, while there is meaningful opportunity across each of our work streams over time, our first priority in 2026 is enhancing commercial execution and forecasting discipline. We will quickly begin to leverage untapped growth vectors in instrument replacement, in E-commerce, and service attachment, and will immediately establish a deal desk to manage pricing discipline. As a prudent starting assumption, we expect to realize approximately $50 million in revenue and $25 million in corresponding adjusted EBIT from revenue synergies in 2026. Let me now describe the first phase of revenue synergy realization in a little bit more detail.

Udit Batra: These are the same levers you've seen us execute successfully at Waters over the past five years. Starting with instrument replacement, there are approximately 22,000 flow and BACTEC instruments that are ripe for replacement. At the same time, a meaningful wave of new products are being launched, such as FACSDiscover A8, S8, A7, and BACTEC FX. To achieve our revenue synergy target of $20 million by year five, we need to drive an incremental 100 instrument replacements per year. To put that into perspective, during our prior instrument replacement initiative at Waters, we delivered double that target in half the time. Our service plan attachment, our $20 million revenue synergy target can be achieved by increasing attachment by approximately 1 percentage point per year, a rate that is more than consistent with our historical performance of more than 2% annually over the past five years.

Udit Batra: For e-commerce, our target is to increase adoption by approximately 4% annually, which, too, is a more measured growth trajectory compared to our historical performance. I will now cover our 2026 guidance. Across our existing businesses, the team is executing well with a revitalized portfolio, leveraging instrument replacement and realizing benefits from our idiosyncratic growth drivers. As a prudent starting point, these dynamics support organic constant currency revenue growth of 5.5% to 7%. Turning to the acquired business contribution, following today's expected close of the transaction, we expect the biosciences and diagnostic solutions businesses to contribute $3 billion of revenue in 2026. While the majority of headwinds that impacted the business in 2025 are already in the baseline, we have further risk-adjusted our outlook to ensure a prudent starting point.

Udit Batra: We're assuming approximately 2.5% underlying growth in 2026 on an owned period basis before any benefit from execution and pricing improvements or planned organizational simplification. Taken together with revenue synergies I just mentioned, this results in total 2026 reported revenue of approximately $6.405 billion to 6.455 billion. These starting assumptions imply a blended year-over-year revenue growth of approximately 5.3% at the midpoint of the combined company in 2026. This is an industry-leading growth guidance and carries clear opportunity for outperformance as the year progresses. From a profitability perspective, we expect to deliver a 2026 adjusted operating margin percentage of approximately 28.1%, which is already more than 100 basis points of margin expansion compared with our deal model in 2025. This translates to full-year 2026 adjusted EPS of $14.30 to $14.50, which is also an attractive starting point reflecting 8.9% to 10.4% growth.

Amol Chaubal: Thank you, Udit, and good morning, everyone. In Q4, we delivered a strong finish to the year with as-reported sales and adjusted EPS landing at the high end of our guidance. Sales of $932 million grew 7% as reported and 6% in constant currency. Orders growth outpaced sales growth in the quarter. By end market, pharma grew 7%, industrial grew 8%, while academic and government declined 3%. In pharma, growth was led by mid-teens performance in Asia, high single-digit growth in Europe, and low single-digit growth in Americas. Instrument replacement remained strong, along with new product adoption in both our instrument and chemistry portfolios. In industrial, Waters Division grew low teens with double-digit strength across chemical analysis, food, and environmental testing. Performance was supported by continued momentum in PFAS-related workflows led by the sensitivity and robustness of the Xevo TQ Absolute XR mass spec system.

Amol Chaubal: TA Division was flat, reflecting an improvement versus the first half of the year as customer spending trends continued to recover. In academic and government, strong double-digit growth in Americas was offset by year-over-year spending declines in other regions. By region, Asia grew low double digits, while Americas and Europe grew mid-single digits. Within Asia, India grew high teens, reflecting continued strength in pharma generics. In China, sales grew 3% as strength in pharma and industrial was partially offset by timing of stimulus-related funding in academic and government. By product line, instrument sales grew 3%. High single-digit LCMS growth was partially offset by a low single-digit decline in TA system sales. We also incurred a low single-digit percentage growth impact from successful customer migration to Empower subscription agreements, which carry long-term recurring revenue benefits. Recurring revenues grew 9%, driven by 8% growth in service and 12% growth in chemistry.

Amol Chaubal: We again saw fantastic customer adoption of our bioseparations columns, which have been a vertical success in the market. Adjusted earnings per share grew 10% to $4.53. GAAP earnings per share were $3.77. For the full year, sales grew 7% on both a reported and constant currency basis. By end market, pharma grew 9%, industrial grew 6%, while academic and government declined 1%. In pharma, all regions delivered high single-digit growth or better, led by Asia, which grew low double digits. In industrial, Waters Division grew low double digits with broad-based double-digit strength across chemical analysis, food, and environmental testing. This was partially offset by a 1% decline in TA Division. In academic and government, the Americas and China grew mid-single digits, while Europe declined 5%. By region, Asia grew low teens, while Americas and Europe grew mid-single digits. Within Asia, India grew high teens, and China grew 9%.

Amol Chaubal: Our strength in China was driven by broad-based growth across pharma, industrial, and ANG. This was supported by share gains in biotech and CDMOs, chemical and environmental workflows, and ANG. By product line, instrument sales grew 5%, led by high single-digit LCMS growth. Recurring revenues grew 8%, with 7% service growth and 12% chemistry growth. For the full year, adjusted earnings per share grew 11% to $13.13. On a GAAP basis, EPS was $10.76. Within the P&L, gross margin was 61.1% for the quarter and 59.3% for the full year, which was better than expected. Adjusted operating margin was 35.2% for the quarter and 30.5% for the year. This reflects the deliberate acceleration of strategic R&D investments in chemistry and informatics, along with the impact of regional sales mix and tariff surcharges. Our operating tax rate came in at 15.7% for both the quarter and the year.

Amol Chaubal: The full year rate includes approximately 50 basis points of discrete benefit related to a change in US tax legislation enacted in 2025. Turning to cash generation and the balance sheet, free cash flow was $125 million in the quarter after funding $39 million of capital expenditures and $15 million of transaction-related costs. For the full year, free cash flow totaled $677 million after funding $113 million of capital expenditures, inclusive of tariff-related mitigation actions, and $29 million of transaction-related costs. Our net debt position at the end of the year was $820 million. Now, I will share further commentary on our 2026 outlook and provide our first quarter guidance. We are executing well with a revitalized portfolio, leveraging instrument replacement and benefiting from our idiosyncratic growth drivers. We expect this momentum to continue into 2026.

Amol Chaubal: As a prudent starting point, these dynamics support standalone full year 2026 organic constant currency revenue growth of 5.5% to 7%. We expect favorable foreign exchange translation to provide 0.5% tailwind to organic sales, which translates to organic reported revenue of $3.355 billion to 3.405 billion in 2026. Turning to the acquired business contribution, following today's expected closing of the transaction, we expect the acquired biosciences and diagnostic solutions businesses to contribute $3 billion of revenue in 2026. In setting this expectation, we have risk-adjusted the underlying growth assumptions, even though most of the headwinds that impacted the business in 2025 are already in the baseline as we enter 2026. Our guidance prudently assumes approximately 2.5% underlying constant currency growth for these businesses in 2026 on an owned period basis before any benefit from execution and pricing improvements or our organizational changes.

Amol Chaubal: In addition, we expect to realize approximately $50 million of revenue synergies in 2026, reflecting the initial contribution from the first wave of commercial excellence initiatives discussed earlier. Taken together, this results in a total reported 2026 revenue of $6.405 billion to 6.455 billion. These starting assumptions imply blended year-over-year constant currency growth of approximately 5.3% for the combined company in 2026. From a profitability perspective, we expect to deliver an adjusted EBIT margin of 28.1% in 2026, consistent with our deal model. This reflects approximately 80 basis points of adjusted operating margin expansion at Waters on a standalone basis, consistent with our investor day algorithm, to approximately 31.3%, an adjusted operating margin percentage of approximately 22.4% for biosciences and diagnostic solutions, a $25 million contribution from the $50 million anticipated revenue synergies, and $55 million contribution from anticipated cost synergies.

Amol Chaubal: Below the line, net interest expense is expected to be approximately $179 million, and our full-year tax rate is expected to be approximately 16.6%. From a share count perspective, our updated capital structure results in approximately 94.3 million diluted shares outstanding on a full-year average basis in 2026. At closing, our new share count is 98.4 million shares. This translates to full-year 2026 adjusted earnings per fully diluted share of $14.30 to $14.50 and represents 8.9% to 10.4% growth. It includes $0.10 of adjusted EPS accretion versus Waters' standalone non-GAAP EPS profile due to the transaction already before a first full year of ownership. It is important to note that quarterly EPS figures are not additive to the full-year EPS due to a significant change in average shares outstanding between the first quarter and the remainder of the year.

Amol Chaubal: For Q1 2026, we are beginning the year with strong momentum across our core businesses. We expect standalone organic constant currency revenue growth of 7% to 9%. With tailwinds from favorable foreign exchange translation, reported standalone revenue is expected to be approximately $718 to 731 million. Turning to the acquired business contribution, we expect the biosciences and diagnostic solutions businesses to contribute $480 million of revenue in the partial Q1 2026. This calls for a low single-digit revenue decline. Quarter-to-date trends reinforce our confidence in this outlook. Taken together, this results in a total reported Q1 2026 revenue of $1.198 to 1.211 billion. For modeling purposes, Q1 average share count is expected to be 82 million, and tax rate is expected to be consistent with our full year outlook.

Amol Chaubal: Our growth outlook of 5.3% at midpoint for the combined company is appropriately prudent, yet industry-leading even before factoring in the full benefits of upcoming execution improvements, which we will now work decisively to implement. Within the P&L, we are confident in our ability to accelerate value creation as the year progresses. We look forward to updating you on our progress as we move through the year. So, with that, I will now turn the call back to Caspar. Thanks, Udit. That concludes our prepared remarks. We are now happy to open the lines and take your questions. We will now begin Q&A. If you would like to ask a question, please use the raise your hand feature at the bottom of your screen. If you are dialed in by phone, press star 9 to raise your hand and star 6 to unmute.

Amol Chaubal: Please accept the prompt and unmute your audio when called upon. As a reminder, we are allowing one question and one follow-up. We will wait a moment to allow the queue to form. Our first question will come from Tycho Peterson with Jefferies. Your line is now open. Please go ahead. Hey, thanks. Udit, I think that two things people really want to dig into here are obviously the BD results this morning and the numbers obviously have deteriorated relative to the original deal model. So, maybe just talk a little bit about your take on the numbers this morning, particularly for the lagging parts of the portfolio: US academic government, China, early-stage research on the BD side, and how do we think about the path to recovery there. And then the second thing is instruments and the Empower impact on that transition.

Amol Chaubal: You couple this with a host of innovative new products in both diagnostic solutions and in bioscience across flow cytometry as well as across the microbiology business and the molecular diagnostics business. You start at a fresh portfolio. And so, we are now really squarely focused on first improving the operational execution, for instance, by implementing a deal desk for pricing discipline and discounting discipline, ensuring launch readiness of this fantastic portfolio just like we did with Alliance iS, and improving forecast accuracy to minimize surprises. And equally, after months of detailed integration planning, we're now ready to deliver the synergies, be it around instrument replacement, e-commerce, or service attach. And look, I mean, with service attach, we're starting at a 40% number, and you've seen what we've already done in 2025 alone. So, we're very confident to deliver the $50 million in revenue synergies and more.

Udit Batra: You couple this with a host of innovative new products in both diagnostic solutions and in bioscience across flow cytometry as well as across the microbiology business and the molecular diagnostics business. You start at a fresh portfolio. And so, we are now really squarely focused on first improving the operational execution, for instance, by implementing a deal desk for pricing discipline and discounting discipline, ensuring launch readiness of this fantastic portfolio just like we did with Alliance iS, and improving forecast accuracy to minimize surprises. And equally, after months of detailed integration planning, we're now ready to deliver the synergies, be it around instrument replacement, e-commerce, or service attach. And look, I mean, with service attach, we're starting at a 40% number, and you've seen what we've already done in 2025 alone. So, we're very confident to deliver the $50 million in revenue synergies and more.

Amol Chaubal: This is through the year. Every quarter has been high single digits to double digits for LC-MS with the same drivers, instrument replacement cycle still going strong, as well as the idiosyncratic growth drivers plus the new products. TA was a drag at a low single-digit percentage to the overall instrument number given the weakness in both the US and Europe. And what's great news is something that we've been telegraphing for a while is the transition of Empower from on-prem to subscription, where several large pharma customers transitioned in Q4, and that was about a low single-digit headwind to the overall instrument number. So overall, LC-MS, high single-digit growth, TA was a low single-digit percentage headwind just given the challenges in US and Europe. And Empower really a wonderful transition that we told you that we will talk about it.

Udit Batra: This is through the year. Every quarter has been high single digits to double digits for LC-MS with the same drivers, instrument replacement cycle still going strong, as well as the idiosyncratic growth drivers plus the new products. TA was a drag at a low single-digit percentage to the overall instrument number given the weakness in both the US and Europe. And what's great news is something that we've been telegraphing for a while is the transition of Empower from on-prem to subscription, where several large pharma customers transitioned in Q4, and that was about a low single-digit headwind to the overall instrument number. So overall, LC-MS, high single-digit growth, TA was a low single-digit percentage headwind just given the challenges in US and Europe. And Empower really a wonderful transition that we told you that we will talk about it.

Amol Chaubal: And on the 7% at the top end of the guide, that is our recurring revenue sort of guidance for the year. This basically, again, constitutes several upsides that we've not baked into the guide itself. I mean, we've assumed that the academic and government drug discovery pharma research segments don't recover. In China, we've assumed a mid-single-digit growth versus what we've done this year, which is about 9%. I mean, a fantastic growth in China, but we've assumed mid-single-digit and not included any sort of stimulus revenue. We've incorporated already the Empower headwinds from converting from CapEx to a recurring revenue. This does not include reshoring revenues. And finally, for the full year, we've assumed that chemistry is roughly 6% in our guide while finishing the year at 12% in chemistry growth rate. So, several areas to basically have risk on the upside.

Udit Batra: And on the 7% at the top end of the guide, that is our recurring revenue sort of guidance for the year. This basically, again, constitutes several upsides that we've not baked into the guide itself. I mean, we've assumed that the academic and government drug discovery pharma research segments don't recover. In China, we've assumed a mid-single-digit growth versus what we've done this year, which is about 9%. I mean, a fantastic growth in China, but we've assumed mid-single-digit and not included any sort of stimulus revenue. We've incorporated already the Empower headwinds from converting from CapEx to a recurring revenue. This does not include reshoring revenues. And finally, for the full year, we've assumed that chemistry is roughly 6% in our guide while finishing the year at 12% in chemistry growth rate. So, several areas to basically have risk on the upside.

Amol Chaubal: Also ensuring that the launches for the new products that are coming through go extremely well and something we've done by targeting, segmenting very precisely for our Alliance iS and Xevo TQ Absolute products. Equally, we're squarely focused on taking all the work that's happened in integration planning and implementing that throughout the year to increase momentum on the revenue synergy side. Instrument replacement, service attach, and e-commerce should contribute immediately. So, feel very good about the starting point after a lot of planning. Our next question will come from Jack Meehan with Nephron. Thank you. Good morning. Udit, on BD, you talked a couple of times about setting up a deal desk for pricing. Can you talk about which product areas are in focus and how you think how you think that's been optimized in the past? Yeah.

Amol Chaubal: And for instruments, it's extremely important to not sort of lose the pricing discipline as you negotiate the deals. It's pretty easy to sort of give away pricing on highly innovative products if you're not disciplined. And on the recurring revenue side, we see a benefit both on the service piece so that we are charging for installation, we're charging for spare parts in an appropriate way, but also on the reagent side where there is no reason for BD to not command the same sort of price premium that our chemistry revenue does. These are highly differentiated dyes and antibodies that only BD produces. And these are of the highest quality. So there's zero reason why there should be discounting there. So we expect those to immediately impact. And those impact both the top line and the bottom line, Jack. Great.

Udit Batra: And for instruments, it's extremely important to not sort of lose the pricing discipline as you negotiate the deals. It's pretty easy to sort of give away pricing on highly innovative products if you're not disciplined. And on the recurring revenue side, we see a benefit both on the service piece so that we are charging for installation, we're charging for spare parts in an appropriate way, but also on the reagent side where there is no reason for BD to not command the same sort of price premium that our chemistry revenue does. These are highly differentiated dyes and antibodies that only BD produces. And these are of the highest quality. So there's zero reason why there should be discounting there. So we expect those to immediately impact. And those impact both the top line and the bottom line, Jack.

Amol Chaubal: We feel really good that after having done a lot of work over the last several months, we are well on track to deliver our deal announcement commitments. Your next question will come from Matt Larew with William Blair. Hi. Good morning. Sticking with BD and maybe thinking about the revenue synergy sides, the results from the most recent quarter called out a number of issues, but maybe even over the last couple of years might be suggestive of a business in need of commercial investment to improve execution. How do you think about the level of investment needed for the business long-term and how that perhaps works with the idea of the EBIT contribution you're hoping to get from revenue synergies? Matt, that's a really good question and something that we invested a lot of time in doing the integration planning.

Amol Chaubal: Now, you take what I mentioned on the pricing discipline or launch readiness. We have central teams that we will now deploy into the businesses, into the acquired businesses, to implement this pricing discipline and train the teams locally and eventually leave a few of these people behind to manage that on a day-to-day basis, something we've done in the past as well. So the pricing discipline that we've seen at Waters or TA or clinical in the past will now be applied to the new divisions in the same way. So there will be commercial investment to ensure operational excellence, be it on launch readiness, be it on pricing. And equally, we've looked at separately the amount of resources that are going after the launches, be it the FX on the microbiology business, be it BD COR, where it is enhancing HPV testing across the overall population.

Udit Batra: Now, you take what I mentioned on the pricing discipline or launch readiness. We have central teams that we will now deploy into the businesses, into the acquired businesses, to implement this pricing discipline and train the teams locally and eventually leave a few of these people behind to manage that on a day-to-day basis, something we've done in the past as well. So the pricing discipline that we've seen at Waters or TA or clinical in the past will now be applied to the new divisions in the same way. So there will be commercial investment to ensure operational excellence, be it on launch readiness, be it on pricing. And equally, we've looked at separately the amount of resources that are going after the launches, be it the FX on the microbiology business, be it BD COR, where it is enhancing HPV testing across the overall population.

Amol Chaubal: Or on the flow cytometry side, we've taken specialists and moved them into the different businesses, equally investing further in commercial readiness. So we feel pretty good about the resources we've put against improving the execution rhythm, but also getting a stronger uptake of the new products. Thank you. Your next question will come from Casey Woodring with J.P. Morgan. Great. Thank you for taking my questions. So another strong quarter of chemistry performance. Curious if you could just unpack that for us. How much of that was price? How much was new product contribution and bioseparations? And as a follow-up on pricing, can you just elaborate? You had talked about, I think it was 100 to 200 basis points, a pricing improvement with a high stick rate in that business. So how do you see pricing evolving here in chemistry within that 6% 2026 guidance framework? Thank you.

Amol Chaubal: Let me start with this, Casey, and Amol will elaborate. Look, very happy with what we're seeing on chemistry, 12% growth for the year, seeing really nice momentum already in Q1 with the innovation. And I mean, basically, it's a mix of what you just mentioned earlier. These are highly innovative products that command a price premium. From a pipeline and product perspective, as I mentioned in the prepared remarks, we've built on the MaxPeak Premier technology, which is bioinert, which sort of targets bioinert surfaces of all types with SEC columns, with oligonucleotides, with slalom chromatography. And sort of the newest kid on the block is the affinity chromatography where we're attaching antibodies to particles. And here, super excited about what's going to come from BD with the capability in biology and antibody preparation so we can prepare specific antibodies to conjugate to our particles.

Udit Batra: Let me start with this, Casey, and Amol will elaborate. Look, very happy with what we're seeing on chemistry, 12% growth for the year, seeing really nice momentum already in Q1 with the innovation. And I mean, basically, it's a mix of what you just mentioned earlier. These are highly innovative products that command a price premium. From a pipeline and product perspective, as I mentioned in the prepared remarks, we've built on the MaxPeak Premier technology, which is bioinert, which sort of targets bioinert surfaces of all types with SEC columns, with oligonucleotides, with slalom chromatography. And sort of the newest kid on the block is the affinity chromatography where we're attaching antibodies to particles. And here, super excited about what's going to come from BD with the capability in biology and antibody preparation so we can prepare specific antibodies to conjugate to our particles.

Amol Chaubal: So feel very good about what's been happening and a nice momentum already at the start of the year. Amol, do you want to talk about pricing? Yeah. I mean, on chemistry alone, Casey, as we had outlined, chemistry, we are able to get an amazing stick rate on our list price increases. So for like-for-like SKU, like-for-like geography, we are generating close to 400, 450 basis points on chemistry. On the overall portfolio basis, we are generating about 200 basis points of like-for-like SKU, like-for-like geography that doesn't include upsell. And that's sort of running ahead of what we outlined at our investor day. But more critically, that's a significant opportunity that lies ahead of us for BD, remember, because Waters back pre-COVID was 50-ish basis points of year-over-year price. And now we are consistently delivering 200 basis points plus. And BD is exactly that, right?

Amol Chaubal: Historically, they've done somewhere between 40 to 50 basis points and a meaningful opportunity ahead of us to reapply our blueprint that has been so successful. Great. Thank you. Your next question will come from Puneet Souda with Leerink. Yeah. Hi. Udit, Amol, and Caspar, thanks for taking my question. If I could circle back to an earlier question around the conservatism you were taking in the acquired assets growth. Obviously, those numbers are lower versus the expectations you had earlier. Understand that you're baking in pricing and KPI discipline that you're going to bring about. But you are in markets that are different to what pharma, QA/QC, have been. So maybe just I would love to understand, if you could, how much of a cushion there is in these numbers? How adjusted are they?

Amol Chaubal: But again, when you look at our own Waters standalone US ANG performance, it's a tale of two worlds, right? So there is a clear, meaningful upside if we can reapply our success to some of these parts, like what we've done in China, like what we've done with US ANG. But at the beginning of the year, right out of the gate, we want to be prudent. Got it. That's helpful. And then was there any contribution from extra selling days in Q1 that you're contemplating? So I mean, our Q1 guide reflects 4 extra working days. Your next question will come from Subbu Nambi with Guggenheim. Hey, guys. Thank you for taking my question. Amol, what does operating margin progression look like this year with the addition to BD? What prudence is in those risk-adjusted assumptions given it's a cleaner base? Yeah.

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