Waters Corp Wells Fargo 21st Annual Healthcare Conference

Firstly, thank you for having us.

Of course. It's a pleasure to see you again.

Look, coming in Q2 was, on the base business, a continuation of what's been happening for the last 7 to 8 quarters, right? We've been growing high single digits, about 8-ish percent for that timeframe, and the drivers are somehow consistent, right? Instruments grew high single digits again, LC-MS, no matter how you look at it, geographically, the same sort of growth rate. Recurring revenue really nice growth. Chemistry double digits, and if you adjust for the Liberation Day pull forward, it was 16%. Service was high single digits. So the portfolio has been doing extremely well across the board. End markets, pharma double digits, Academia & Government also double digits, despite the fact that we'd sort of talked about slowdown in different geographies. We saw a double-digit growth. Even academic customers reward innovation.

They find money if you have something meaningful for them to solve problems. If you look at it geographically, China grew 6-ish percent. But if you, again, take out the pull forward from Liberation Day, it was 10%. Pharma in China was 24% growth, right? So really strength across the board geographically, portfolio-wise, and customer-wise on the base business, and same was true with the acquired businesses, where we saw nice momentum build up. We're already at mid-single-digit growth rate. The second half of the year, we'll see more acceleration versus what we've seen in the first half, even for the acquired businesses. So the setup is exceptionally good. The end markets are even better than what we started with when we started the transformation.

I think- embedded in that Think about it qualitatively and quantitatively.

I will try to address, I think your question was quantitative, but let me give you the qualitative underlying basis. On the base business, we just went through the litany of reasons why there is momentum. There is no reason for the underlying momentum to slow down. We see the funnels are very strong. Customer conversations are stronger. Geographically, China is going from strength to strength, and the stimulus is not even in the guide. Qualitatively, there is no reason for the base business to slow down. When you just stay on the base business from Q3 to Q4, we usually talk about step up and step downs. The step up, usually in the last two years, has been high teens in terms of growth rate. Even if you adjust for days, we see only a 13% step up in guide.

There is room for overachievement in Q4. Long way of saying quantitatively and qualitatively that there is room for overachievement on the base business. On the BD side, given it is an acquisition year, it is better to look at a two-year CAGR. If you look at a two-year CAGR, Q2 and Q3 guide are roughly 1%-2% growth. Q4 is -2% to 3%, so there is room there as well. We simply have given ourselves room in Q4. What is important to remember, for the base business is we are traversing at the high end of our old market, and we are growing pretty nicely ending 2026. For the BD acquired businesses, Q4 will likely exit at least around 6%, if not more.

Now, I would not want that to be a starting point for anything going forward, but the setup, the drivers, the execution, is really going well, right?

It sets us up nicely for 2027.