Waters (WAT) 43rd Annual J.P. Morgan Healthcare Conference 2025 summary

Business model and market overview

• Operates in a $12B total accessible market growing mid-single digits, with pharma, clinical, food, environment, and materials sectors leading growth driven by biologics and novel modalities.

• Business model is robust and repeatable, centered on liquid chromatography, mass spectrometry, informatics, and consumables, with 60% recurring revenue from services and chemistry, and instruments replaced every 7-10 years.

• Maintains industry-leading operating margin at 30.7% and generates $0.25 of every sales dollar as free cash flow, with a 59.7% gross margin and 23% FCF as % of sales (5-year avg).

• Geographic revenue is balanced: 38-40% APAC, 33% Europe, and just under 30% Americas, diversified across pharma, industrial, academic, and government sectors.

• About 75% of end market applications are resilient to economic cycles, especially in pharma and food/environmental testing, supporting recurring revenue and predictable replacement cycles.

Transformation plan execution

• Transformation plan since 2020 focused on regaining commercial momentum, revitalizing innovation, and entering faster-growing adjacencies, delivering strong operational performance despite market headwinds.

• Five commercial initiatives included instrument replacement, increased service attachment, e-commerce growth, contract organization exposure, and new product launches.

• Service attachment rates rose from 43% to over 50%; e-commerce chemistry revenue grew from under 20% to over 40%.

• Innovation highlights: Alliance iS HPLC, Xevo TQ Absolute for PFAS, MaxPeak Premier technology, and recent launches in bioseparations, clinical diagnostics, and battery testing, all driving double-digit growth in targeted segments.

• Entry into adjacencies like bioseparations, bioanalytical characterization, clinical diagnostics, and battery testing expanded TAM by $7B.

Financial and operational performance

• Maintained top-tier total shareholder return over four years, moving from bottom to near top among peers.

• Recurring revenue growth remained stable through economic volatility, while instrument sales were more cyclical.

• Gross margin expanded by 210 bps and operating margin by 80 bps in the last 12 months, outpacing peers, with proactive cost alignment and productivity initiatives.

• Productivity initiatives and pricing contributed to margin expansion; new global capability centers expected to add 300 bps over 8-10 years.

• Capital allocation strategy includes share buybacks and accretive M&A, supported by strong free cash flow.