Waters Corporation, based in Milford, Massachusetts, is a publicly traded analytical laboratory instrument and software firm. It employs more than 7,800 people and is present in over 35 countries including Singapore, India, Germany, and Japan.

  • Liquid chromatography, mass spectrometry, supercritical fluid chromatography, laboratory informatics, rheometry, and microcalorimetry are among the products Waters sells to lab-based businesses
  • The company booked sales of $ 2.8B in 2021 and generated an operating margin of 30.2%
  • 60% of it sales come from its pharmaceutical activities, 30% are from its industrial clients and 10% from government and academic sales

ADVANCED SPECIALTY MEASUREMENT

Waters Corporation is a specialty measurement company and pioneer of analytical workflow solutions involving liquid chromatography, mass spectrometry and thermal analysis innovations serving the life, materials and food sciences industries.

  • Today, it primarily designs, manufactures, sells and services high performance liquid chromatography (“HPLC”), ultra-performance liquid chromatography (“UPLCTM” and together with HPLC, referred to as “LC”) and mass spectrometry (“MS”) technology systems and support products
  • These systems are complementary products that are frequently employed together (“LC-MS”) and sold as integrated instrument systems using common software platforms
Waters Corporation - Investor Presentation

In addition, Waters designs, manufactures, sells and services thermal analysis (TA), rheometry and calorimetry instruments through its TA Instruments product line. It is also a developer and supplier of advanced software-based products that serve as interface for the company’s instruments.


PROVIDING THE TOOLS FOR BIOLOGICAL AND MEDICAL ANALYSIS

The company’s products are used by pharmaceutical, biochemical, industrial, nutritional safety, environmental, academic and governmental customers working in research and development, quality assurance and other laboratory applications.

Waters Corporation - Investor Presentation
  • LC is a standard technique and is utilized in a broad range of industries to detect, identify, monitor and measure the chemical, physical and biological composition of materials, and to purify a full range of compounds
  • MS technology, principally in conjunction with chromatography, is employed in drug discovery and development, including clinical trial testing, the analysis of proteins in disease processes (known as “proteomics”), nutritional safety analysis and environmental testing
  • LC-MS instruments combine a liquid phase sample introduction and separation system with mass spectrometric compound identification and quantification
  • Waters' thermal analysis, rheometry and calorimetry instruments are used in predicting the suitability and stability of fine chemicals, pharmaceuticals, water, polymers, metals and viscous liquids for various industrial, consumer goods and healthcare products, as well as for life science research

IN-HOUSE R&D LEADER

Waters Corp maintains an active research and development program focused on the development and commercialisation of products that extend and update its existing product offering. Research and development expenditures for 2021 totalled $ 168m (versus $ 143m in 2019).

  • Nearly all of the company’s LC products have been developed at the company’s main research and development center located in Milford, Massachusetts and the majority of the company’s MS products are developed at facilities in England
  • The company employs more than 1,150 people in its research and development division and headcount is slightly growing year over year

THE MARKET

According to Markets And Research, the global preparative liquid chromatography market is expected to grow from $ 1.6B in 2021 and to reach $ 3.3B by 2030, growing at a CAGR of 8.4% during the 2022 to 2030 period.

  • Growth can be attributed to considerable research and development spending for product innovation, and rising demand for biopharmaceutical products
  • The emergence of chromatography in government-funded research practices is further boosting the market

According to Allied Market Research, the global mass spectrometry market size was valued at $ 5.8B in 2020, and is projected to reach $ 12.7B by 2030, registering a CAGR of 8.0%.

  • The market is pushed by the increased demand for pharmaceutical solutions following the pandemic and is further supported by overall market pharmaceutical market growth

"The COVID-19 outbreak has impacted the global mass spectrometry market positively. There has been a high demand for multiple spectrometers from the biotechnology and pharmaceutical industries due to the COVID-19 driving market. By 2020, in India, researchers at the Delhi-based Institute of Genomics and Integrative Biology (IGIB) and the National Center for Disease Control (NCDC) were able to find a novel coronavirus (COVID-19) with 95% sensitivity and 100% precision with respect to RT-PCR using a mass spectrometer."

"In April 2020, UK diagnostics firm MAP Sciences announced the development of a rapid test for the COVID-19 virus. This technology uses multiple spectrometry to detect different proteins in COVID-19 and is intended to deliver test results within 30 minutes. These developments are expected to foster the growth of the market." by Shubham Choudante, Vishal Bhardwaj , Onkar Sumant for Allied Market Research


EXPERIENCED MANAGEMENT

Waters Corporation is led by Dr. Udit Batra since 2020. Before joining the company, he served as CEO of Merck's life science business. He also worked at Novartis.

Udit Batra

  • Dr. Udit Batra is president and CEO of Waters Corporation. Before joining Waters in September 2020, Udit served as CEO of the $ 7.7B life science business of the German Merck KGaA, which operates as MilliporeSigma in the United States and Canada
  • From 2011-2013, as CEO of Merck KGaA’s consumer health business, Udit led a period which saw doubling of the business’ profitability and achieving organic growth in the top tier of the industry. Earlier in his career, Udit served in a range of leadership positions at Novartis, a Swiss multinational pharmaceutical company
  • He also serves on the Advisory Councils of the Chemical Engineering Departments of Princeton University where he earned his Ph.D. in Chemical Engineering and the University of Delaware where he earned a B.S. in Chemical Engineering

Amol Chaubal

  • Amol Chaubal was appointed Chief Financial Officer of Waters Corporation in May 2021
  • Prior to joining Waters, Amol was Chief Financial Officer at Quanterix since 2019 where he helped oversee a period of strong shareholder value creation and returns. From 2017 to 2019, Amol was Chief Financial Officer of Global Operations at Smith & Nephew. Prior to this, Amol was Chief Financial Officer North America at Novartis Vaccines & Diagnostics and spent 11 years with Novartis
  • He earned a master’s in chemical engineering from Indian Institute of Technology, Mumbai and an MBA from INSEAD, France

Daniel Rush

  • Dr. Daniel Rush was appointed Senior Vice President, Strategy and Transformation of Waters Corporation in 2021
  • Prior to joining Waters, Dan served as Vice President, Worldwide Commercialization Strategy & Innovation at Bristol Myers Squibb (BMS). Prior to BMS, he spent eight years at Novartis in a variety of sales, marketing, and strategy leadership roles, including Head of Global Pharma Strategy, U.S. Launch Lead for Afinitor and U.S. Marketing Director for Zometa. Dan began his career as a chemist in Pharmaceutical R&D at Merck, following a post-doctorate in materials science at the University of California, Irvine and Sandia National Laboratories
  • He earned a B.A. in chemistry and history from Bowdoin College and a Ph.D. in physical organic chemistry from Yale University

TAKE A BREATH

So… This is a lot of information. Let’s summarise:

  1. Waters Corporation, based in Milford, Massachusetts, is a publicly traded analytical laboratory instrument and software firm. It employs more than 7,800 people and it is present in more than 35 countries including Singapore, India, Germany, and Japan
  2. Waters Coporation is led by Dr. Udit Batra since 2020. Before joining the company, he served as CEO of Merck's life science business and he also worked at Novartis
  3. The company’s products are used by pharmaceutical, biochemical, industrial, nutritional safety, environmental, academic and governmental customers working in research and development, quality assurance and other laboratory applications
  4. Waters Corp maintains an active research and development program focused on the development and commercialisation of products that extend and update its existing product offering

FINANCIAL CHECK

Sales for the quarter were $ 691m, an increase of 13% as reported and 16% in constant currency, compared to sales of $ 609m for the first quarter of 2021.

  • Instrument sales grew 26% in constant currency, with strong growth across LC, MS and TA product lines
  • All end-markets grew, with pharmaceutical and industrial both up high-teens
  • Broad-based sales growth across all geographies, led by U.S. which grew 28% and China grew 17% in constant currency
  • GAAP EPS of $2.62; non-GAAP EPS of $2.80, a 22% increase from prior year
  • Recurring revenues, which represent the combination of service and precision chemistries, increased 6% as reported and 9% in constant currency, while instrument system sales increased 24% as reported and 26% in constant currency
  • Geographically, sales in Asia during the quarter increased 11% as reported and 14% in constant currency, sales in the Americas increased 26% (with U.S. sales growing 28%), and sales in Europe increased 3% as reported and 9% in constant currency
  • Sales in China increased 18% as reported and 17% in constant currency

The company raised its full-year 2022 guidance, and now expects constant currency sales growth in the range of 7.5% to 9%. The company is also raising its full-year 2022 non-GAAP EPS guidance to the range of $11.90 to $12.10.


THE BOTTOM LINE

The Good

  • Demand for advanced pharmaceutical instruments is growing at a global level as medical players are looking to cut costs while maintaining the quality of their products
  • Furthermore, Waters also helps energy companies optimise the safety of batteries and helps CPG players improve their personal care products, all while keeping costs down
  • The company is completing a turnaround that sets it on track to grow sales and profits again

The Bad

  • Growth may have been boosted by the pandemic and may lead Waters to see a slight decrease in sales going forward

THE STAKE

We do not have a stake in Waters Corporation yet. Waters Corporation is an advanced analytical laboratory instrument and software firm that is completing a turnaround which started in 2020 and is already providing stronger growth rates while preserving high profitability rates.

  • We will start a stake if it manages to protect its growth and margins past the pandemic
  • We will stop considering if it appears that growth slows as the boost provided by the pandemic fades

THESE ARE OUR INVESTMENTS

We have invested in over 25 stocks throughout North America, Latin America, Europe and Asia. Typically, we target growing companies (U.S. and global) with a market cap between $ 1B and $ 100B. Subscribe now and get access to our full portfolio.

You can see our full portfolio here:

Portfolio
We have invested in over 25 stocks throughout North America, Latin America, Europe and Asia. Typically, we target fast-growing companies (U.S. and global) with a market cap between $ 1B and $ 100B.

Disclaimer

Please note that this article does not constitute investment advice in any form. This article is not a research report and is not intended to serve as the basis for any investment decision. All investments involve risk and the past performance of a security or financial product does not guarantee future returns. Investors have to conduct their own research before conducting any transaction. There is always the risk of losing parts or all of your money when you invest in securities or other financial products.

Credits

Photo by Louis Reed on Unsplash.