01—Abstract
Summary
Summary of the 10-Q filed May 7, 2024. Cited figures are marked; the original filing is the authoritative source.
Waters Corporation reported a first quarter 2024 (three months ended March 30, 2024) with total net sales of $636.8 milliona, down 7% from $684.7 million in the prior-year quarter.
Operating income fell 23% to $133.8 millionb from $174.2 million, and net income declined to $102.2 million, or $1.72 per diluted share, from $140.9 million, or $2.38 per diluted share. The filing attributes the sales decline mainly to lower customer demand, with customers delaying instrument system purchases amid cautious capital spending. Instrument system sales fell 20%, while recurring revenues (chemistry consumables and services) rose 3%.
Operating income was also pressured by Wyatt acquisition-related costs, March 2024 severance costs tied to a workforce reduction of about 2% of employees (primarily in China), and $10.2 millionc of patent litigation provisions. Cash flow from operations improved to $262.9 million from $196.8 million, driven by lower annual incentive bonus payments and better working capital. The company used $292.2 million in financing activities, mainly to repay $300 million of debt, reducing total debt to $2.06 billion from $2.36 billion at year-end 2023.
Cash and cash equivalents declined to $337.3 milliond. Waters temporarily suspended share repurchases following its May 2023 acquisition of Wyatt Technology, which was completed for $1.3 billion in cash. The company has $1.0 billion remaining under its share repurchase authorization.
The filing reports that management concluded disclosure controls were effective and that no material changes occurred in risk factors relative to the 2023 Form 10-K. Stockholders' equity rose to $1.26 billion from $1.15 billion, and goodwill was $1.30 billion at March 30, 2024.
02—Key points
Key Highlights
- Total net sales decreased 7% to $636.8 million, with instrument system sales down 20% on weaker customer demand across regions.
- Operating income declined 23% to $133.8 million; operating margin was 21.0% versus 25.4% a year earlier.
- Net income was $102.2 million, or $1.72 per diluted share, compared with $140.9 million, or $2.38 per diluted share.
- Recurring revenues (chemistry consumables and services) increased 3%, with service revenues up 5%.
- Operating cash flow rose to $262.9 million from $196.8 million, and total debt was reduced to $2.06 billion from $2.36 billion.
- Share repurchases were temporarily suspended following the Wyatt Technology acquisition, which cost $1.3 billion in cash; $1.0 billion remains authorized.
- A workforce reduction of about 2% of employees, mainly in China, and $10.2 million of patent litigation provisions weighed on operating expenses.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2024, Waters kept $0.16.
- Revenue$636.8M100.0%
- Cost of revenue−$261.8M41.1%
- Gross profit$375.1M58.9%
- Operating costs−$241.2M37.9%
- Operating income$133.8M21.0%
- Interest, other & tax−$31.6M5.0%
- Net income$102.2M16.0%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2024filed May 7, 2024Financial Statements
Q1 FY2024 against Q1 FY2023
| Line item | Q1 FY2024Q1 FY2023 | Change |
|---|---|---|
| Revenue | $636.84M$684.67M | −7.0% |
| Cost of Revenue | $261.79M$284.38M | −7.9% |
| Gross Profit | $375.05M$400.29M | −6.3% |
| R&D Expenses | $44.59M$42.69M | +4.5% |
| SG&A Expenses | $174.54M$181.96M | −4.1% |
| Operating Expenses | $502.99M$510.51M | −1.5% |
| Operating Income | $133.85M$174.17M | −23.2% |
| Interest Expense | $25.52M$14.44M | +76.7% |
| Net Income | $102.20M$140.92M | −27.5% |
| EPS (Basic) | $1.73$2.39 | −27.6% |
| EPS (Diluted) | $1.72$2.38 | −27.7% |
| Shares Outstanding (Basic) | 59.23M59.02M | +0.4% |
| Shares Outstanding (Diluted) | 59.43M59.32M | +0.2% |
05—Questions
Frequently Asked Questions
Why did Waters' sales decline in the first quarter of 2024?
The filing attributes the 7% decline to lower customer demand across most major regions, as customers delayed instrument system purchases amid cautious capital spending. Instrument system sales fell 20%, and mass spectrometry systems declined significantly more. Sales in Europe rose 2%, and the Wyatt acquisition added 3% to total sales growth.
How did Waters' profitability change this quarter?
Operating income fell 23% to $133.8 million, and operating margin declined to 21.0% from 25.4%. The decrease reflected lower sales volume and higher Wyatt-related retention and amortization costs, March 2024 severance costs, and $10.2 million of patent litigation provisions. Net income per diluted share was $1.72, down from $2.38.
How is Waters managing its debt and capital allocation?
Waters repaid $300 million of debt during the quarter, reducing total debt to $2.06 billion from $2.36 billion at December 31, 2023. Operating cash flow of $262.9 million funded these repayments. The company temporarily suspended share repurchases due to the Wyatt acquisition, though $1.0 billion remains authorized under the program through January 21, 2025.
What drove the increase in operating cash flow?
Operating cash flow rose to $262.9 million from $196.8 million, attributable to lower annual incentive bonus payments and an improvement in working capital. Accounts receivable decreased $62.6 million, and deferred revenue and customer advances increased $85.9 million. Inventories increased $28.3 million, primarily due to higher material costs.
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