01—Abstract
Summary
Summary of the 10-K filed February 27, 2024. Cited figures are marked; the original filing is the authoritative source.
Waters Corporation reported 2023 total net sales of $2,956,416 thousanda, a 1% decrease from $2,971,956 thousand in 2022, while operating income fell 6% to $817,676 thousand and net income declined 9% to $642,234 thousand, or $10.84 per diluted share.
The filing attributes the sales decline mainly to a 22% reduction in China sales, which fell to $440,707 thousandb from $565,143 thousand. Excluding China, the Company says sales grew 5%, and the Wyatt Technology acquisition, completed May 16, 2023 for a total purchase price of $1.3 billion in cash, added 3% to sales growth. Operating margin declined to 27.7% from 29.4%, reflecting merit-related salary increases, $26 million in severance costs tied to a July 2023 workforce reduction of about 5% of employees, and Wyatt-related costs.
Cash flow from operations was $603 millionc in 2023 versus $612 million in 2022. Total debt rose to $2.4 billion at December 31, 2023 from $1.6 billion, largely from borrowings used to fund Wyatt, and the Company temporarily suspended share repurchases after repurchasing $58 million of stock in 2023 compared with $616 million in 2022. The Company had $396 million of cash, cash equivalents and investments at year-end and a remaining repurchase authorization of $1.0 billion.
The filing also highlights the Company's dependence on the pharmaceutical sector, which represented 57%d of 2023 net sales, and on instrument demand that can fluctuate with customer capital spending and academic and government funding. Management believes existing resources and borrowing capacity will be sufficient to meet obligations for at least the next twelve months.
02—Key points
Key Highlights
- Total net sales were $2,956,416 thousand in 2023, down 1% from $2,971,956 thousand in 2022; excluding China, sales increased 5%.
- China sales fell 22% to $440,707 thousand, driven by lower customer demand, tariffs and government procurement restrictions.
- Net income was $642,234 thousand ($10.84 per diluted share) versus $707,755 thousand ($11.73) in 2022, a 9% decline.
- Operating income was $817,676 thousand, a 6% decrease, with operating margin of 27.7% compared with 29.4% in 2022.
- The Wyatt Technology acquisition for $1.3 billion in cash added 3% to 2023 sales growth and increased debt to $2.4 billion at year-end.
- Share repurchases were temporarily suspended after $58 million of buybacks in 2023, versus $616 million in 2022; $1.0 billion remains authorized.
- Operating cash flow was $603 million in 2023 compared with $612 million in 2022, with a $26 million severance charge tied to a workforce reduction of about 5% of employees.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2023, Waters kept $0.22.
- Revenue$2.96B100.0%
- Cost of revenue−$1.20B40.4%
- Gross profit$1.76B59.6%
- Operating costs−$943.5M31.9%
- Operating income$817.7M27.7%
- Interest, other & tax−$175.4M5.9%
- Net income$642.2M21.7%
Where FY2023 revenue went
$2.96B- Cost of revenue: $1.20B, 40% of revenue
- SG&A: $736.0M, 25% of revenue
- Net income: $642.2M, 22% of revenue
- R&D: $174.9M, 5.9% of revenue
- Other operating costs: $32.6M, 1.1% of revenue
- Interest, other & tax: $175.4M, 5.9% of revenue
Kept 22% as net incomeOther operating costs $32.6M · 1.1%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2023filed February 27, 2024Financial Statements
FY2023 against FY2022
| Line item | FY2023FY2022 | Change |
|---|---|---|
| Revenue | $2.96B$2.97B | −0.5% |
| Cost of Revenue | $1.20B$1.25B | −4.2% |
| Gross Profit | $1.76B$1.72B | +2.2% |
| R&D Expenses | $174.94M$176.19M | −0.7% |
| SG&A Expenses | $736.01M$658.03M | +11.9% |
| Operating Expenses | $2.14B$2.10B | +1.9% |
| Operating Income | $817.68M$873.39M | −6.4% |
| Interest Expense | $98.86M$48.80M | +102.6% |
| Net Income | $642.23M$707.75M | −9.3% |
| EPS (Basic) | $10.87$11.80 | −7.9% |
| EPS (Diluted) | $10.84$11.73 | −7.6% |
| Shares Outstanding (Basic) | 59.08M59.98M | −1.5% |
| Shares Outstanding (Diluted) | 59.27M60.33M | −1.8% |
05—Questions
Frequently Asked Questions
Why did Waters' sales decline in 2023?
Net sales fell 1% to $2,956,416 thousand, primarily because China sales dropped 22% to $440,707 thousand due to weaker customer demand, trade tensions and tariffs, increased local competition, and Chinese government restrictions on procurement by government-funded customers. Excluding China, sales grew 5%, and the Wyatt acquisition contributed 3% to growth.
How did the Wyatt acquisition affect Waters' finances?
Waters acquired Wyatt Technology on May 16, 2023 for a total purchase price of $1.3 billion in cash, funded with balance sheet cash and revolving credit facility borrowings. Total debt rose to $2.4 billion at December 31, 2023 from $1.6 billion, interest expense increased to $99 million, and purchased intangibles amortization increased as a result. Goodwill rose to $1.3 billion from $430 million.
Why did operating margin decline?
Operating income decreased 6% to $817,676 thousand, and operating margin was 27.7% compared with 29.4% in 2022. The filing cites higher salary expenses from merit compensation, $26 million in severance costs from the July 2023 workforce reduction, Wyatt-related due diligence, retention and amortization costs, and a negative foreign currency effect of approximately $23 million.
Is Waters returning cash to shareholders?
Waters has not paid cash dividends in its past three fiscal years and does not intend to pay cash dividends in the foreseeable future. It repurchased $58 million of common stock in 2023, down from $616 million in 2022, and has temporarily suspended repurchases due to the Wyatt acquisition. The remaining authorization is $1.0 billion, extended through January 21, 2025.
How concentrated is Waters' customer base?
Pharmaceutical customers accounted for 57% of 2023 net sales, other industrial accounts for 31%, and academic institutions and governmental agencies for 12%. No single customer accounted for more than 2% of net sales in 2023, 2022 or 2021, although the pharmaceutical sector's market conditions could materially affect results.
06—Continue