01—Abstract
Summary
Summary of the 8-K filed January 9, 2024. Cited figures are marked; the original filing is the authoritative source.
Waters Corporation furnished, under Item 7.01 (Regulation FD), an investor presentation dated January 8, 2024, that CEO Udit Batra presented at the J.P.
Morgan 42nd Annual Healthcare Conference. The filing states that the presentation, along with the subsequent Q&A, included high-level commentary on business performance. The presentation was posted on the company's website before the conference, and a transcript is also available there.
Under the filing's terms, the information is furnished and not deemed filed for purposes of Section 18 of the Exchange Act. The presentation describes the company's business as serving regulated markets with a $12Ba total addressable market (TAM) within an estimated ~$80B analytical instruments market, with 4-6% long-term growth. It cites trailing twelve-month (ended September 30, 2023) revenue of $3.0B, a 59.1% gross margin, a 30.6% adjusted operating margin, and a 24% five-year average free cash flow as a percentage of sales (2018-2022).
Year-to-date through Q3 2023, reported net sales were $2,136.9 millionb versus $2,113.4 million in the prior-year period. Organic constant currency sales growth was +4% excluding China and 0% including China. The company credits Wyatt Technology, acquired in May 2023, with contributing 2% of as-reported sales in 2Q23 and 4% in 3Q23.
Management highlights growth drivers including new therapeutic areas such as GLP-1 injectables and cell and gene therapy, PFAS testing (described as a $300Mc-$350M global market growing 20%), a pivot toward large molecule applications, and expanded M&A capacity. The presentation also includes forward-looking statements, a cautionary statement on risks including the Wyatt acquisition and increased indebtedness, and GAAP to non-GAAP reconciliations.
02—Key points
Key Highlights
- Investor presentation furnished under Item 7.01 was delivered by President and CEO Udit Batra at the J.P. Morgan Healthcare Conference on January 8, 2024, and is not deemed filed under Section 18 of the Exchange Act.
- Trailing twelve-month revenue through September 30, 2023 was $3.0B, with a 59.1% gross margin and a 30.6% adjusted operating margin (GAAP operating income of $839,736 thousand, or 28.0%).
- Year-to-date Q3 2023 organic constant currency sales growth was +4% excluding China and 0% including China; reported net sales were $2,136.9 million versus $2,113.4 million a year earlier.
- Adjusted operating margin for the first nine months of 2023 increased 60 basis points versus 28.8% in 2022, supported by pricing and productivity offsetting volume, FX and inflationary headwinds.
- Wyatt Technology, acquired in May 2023, contributed 2% of as-reported sales in 2Q23 and 4% in 3Q23, and synergy progress was described as ahead of plan.
- The company cites a $12B core TAM within an ~$80B analytical instruments market, with a $7B higher-growth adjacencies TAM for a combined $19B, and identifies QA/QC testing of GLP-1 injectables and PFAS detection as growth tailwinds.
- Management stated it is raising its long-term EPS growth algorithm above '6+2+2' and sees new capacity for M&A given strong free cash flow conversion and a five-year average free cash flow of 24% of sales.
03—Questions
Frequently Asked Questions
Does this 8-K contain new financial results or guidance?
The filing furnishes an investor presentation from the J.P. Morgan Healthcare Conference that includes high-level commentary on business performance. It presents trailing twelve-month and year-to-date 2023 figures and long-term growth framework estimates, which the filing describes as forward-looking statements, but it does not present a separate earnings release in the text provided.
How is the company's profitability described?
For the trailing twelve months ended September 30, 2023, the presentation reports a 59.1% gross margin and a 30.6% adjusted operating margin, compared with GAAP operating income of $839,736 thousand (28.0%). Year-to-date through Q3 2023, adjusted operating margin rose 60 basis points versus 28.8% in 2022, and gross margin improved 160 basis points.
What growth drivers does management highlight?
Management points to new therapeutic areas such as GLP-1 injectables, Alzheimer's disease, and cell and gene therapy; PFAS testing, which it describes as a $300M-$350M global market growing 20%; the shift toward large molecule and biologics applications; and above-historic pricing, which it expects to add about 100 basis points to future long-term growth.
How is the Wyatt Technology acquisition affecting results?
Wyatt Technology was acquired in May 2023 and contributed 2% of as-reported sales in 2Q23 and 4% in 3Q23. The company says synergy progress is ahead of plan, with initiated direct sales and bundling and a LC databridge completed in 4Q23 ahead of schedule. The filing also flags the risk that the company may not realize the intended benefits and that acquisition-related indebtedness could affect future results.
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