01—Abstract
Summary
Summary of the 10-Q filed July 31, 2024. Cited figures are marked; the original filing is the authoritative source.
Waters Corporation's second-quarter 2024 Form 10-Q, filed July 31, 2024, shows a weaker top line and lower profitability.
Total net sales for the three months ended June 29, 2024 were $708.5 milliona, down 4% from $740.6 million a year earlier, and net income was $142.7 million versus $150.6 million. For the six months, net sales were $1.35 billion (down 6%) and net income was $244.9 million (down 16%). Management attributes the decline mainly to customers delaying instrument system purchases amid cautious capital spending.
Instrument system sales fell 14%b in the quarter and 17% in the first half, led by mass spectrometry, while recurring revenues (chemistry consumables and services) grew 4% in both periods. China was a notable weak spot, with sales down 13% in the quarter and 20% for the first half. Profitability and cash flow were mixed.
Operating income declined 5% in the quarter and 14% for the first half, and the first half included a $10 millionc patent litigation settlement and first-quarter severance costs tied to a workforce reduction of about 2%. Diluted EPS was $2.40 for the quarter, down from $2.55. Operating cash flow improved to $317 million from $215 million, helped by lower incentive bonus payments and better working capital.
Total debt fell to $2.01 billiond from $2.36 billion at year-end 2023, as $520 million of debt was repaid, including a $300 million reduction in the credit agreement balance. The filing also reports a $200 million private Master Note Facility Agreement entered into on July 12, 2024, under which no notes had been issued as of July 31, 2024.
Management still expects foreign currency translation to weigh on sales and gross profit for the remainder of 2024. The company has $1.0 billion remaining under its share repurchase authorization and states it has not paid dividends.
02—Key points
Key Highlights
- Total net sales of $708.5 million in Q2 2024, down 4% from $740.6 million; first-half net sales of $1.35 billion, down 6%.
- Instrument system sales fell 14% in Q2 and 17% in the first half, driven by customers delaying purchases amid cautious capital spending.
- Recurring revenues (chemistry consumables and services) grew 4% in both Q2 and the first half of 2024.
- Net income was $142.7 million in Q2 (down 5%) and $244.9 million for the first half (down 16%); diluted EPS was $2.40 for Q2 versus $2.55.
- Operating cash flow rose to $317 million in the first half from $215 million, aided by lower bonus payments and working capital improvement.
- Total debt declined to $2.01 billion from $2.36 billion at December 31, 2023, with $520 million of debt payments in the first half.
- Sales in China fell 13% in Q2 and 20% in the first half; a $200 million Master Note Facility was entered into on July 12, 2024, with no notes issued as of July 31, 2024.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2024, Waters kept $0.20.
- Revenue$708.5M100.0%
- Cost of revenue−$288.2M40.7%
- Gross profit$420.3M59.3%
- Operating costs−$231.2M32.6%
- Operating income$189.1M26.7%
- Interest, other & tax−$46.4M6.5%
- Net income$142.7M20.1%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2024filed July 31, 2024Financial Statements
Q2 FY2024 against Q2 FY2023
| Line item | Q2 FY2024Q2 FY2023 | Change |
|---|---|---|
| Revenue | $708.53M$740.58M | −4.3% |
| Cost of Revenue | $288.24M$301.08M | −4.3% |
| Gross Profit | $420.29M$439.50M | −4.4% |
| R&D Expenses | $46.18M$45.87M | +0.7% |
| SG&A Expenses | $173.25M$186.95M | −7.3% |
| Operating Expenses | $519.42M$540.72M | −3.9% |
| Operating Income | $189.11M$199.86M | −5.4% |
| Interest Expense | $23.73M$23.27M | +2.0% |
| Net Income | $142.74M$150.55M | −5.2% |
| EPS (Basic) | $2.41$2.56 | −5.9% |
| EPS (Diluted) | $2.40$2.55 | −5.9% |
| Shares Outstanding (Basic) | 59.34M58.86M | +0.8% |
| Shares Outstanding (Diluted) | 59.45M59.01M | +0.7% |
05—Questions
Frequently Asked Questions
Why did Waters' sales decline in the first half of 2024?
The filing says customers delayed purchases of instrument systems because they remained cautious about capital spending. Instrument system sales declined broadly across regions, led by mass spectrometry systems, whose timing depends heavily on academic and government funding. Foreign currency translation and lower demand in China also weighed on results.
How did profitability change in the second quarter and first half of 2024?
Operating income was $189.1 million in Q2, down 5%, and $323.0 million for the first half, down 14%. The decline reflected lower sales volume and Wyatt-related retention and amortization costs, and the first half also included a $10 million patent litigation settlement and severance costs from a March 2024 workforce reduction.
What is the company's debt position?
Total debt was $2.01 billion at June 29, 2024, down from $2.36 billion at December 31, 2023. The company had $1.3 billion of senior unsecured notes and $750 million drawn under its credit agreement, and it reported compliance with all debt covenants.
What new financing arrangement did the company enter into after the quarter?
On July 12, 2024, Waters entered into a private Master Note Facility Agreement with NYL Investors LLC allowing issuance of up to $200 million of senior promissory notes. The purchase of any notes is at the sole discretion of NYL Investors, and no notes had been issued as of July 31, 2024.
Is the company returning capital to shareholders?
The company repurchased $13.3 million of treasury shares in the first half of 2024, mainly tied to restricted stock unit vesting, and made no open market repurchases in 2024. It had $1.0 billion remaining under its share repurchase authorization, which runs through January 21, 2025. The company has not paid dividends and has no current plans to do so.
06—Continue