WATERS CORP /DE/

Waters Corporation is a global leader in analytical instruments and software, having pioneered innovations in chromatography, mass spectrometry and thermal analysis serving life, materials and food sciences for more than 65 years. The Company primarily designs, manufactures, sells and services high-performance liquid chromatography (HPLC), ultra-performance liquid chromatography (UPLC) and mass spectrometry (MS) technology systems and support products, including chromatography columns, other consumable products and comprehensive post-warranty service plans. The Company also designs, manufactures, sells and services thermal analysis, rheometry and calorimetry instruments through its TA Instruments product line. The Company's products are used by pharmaceutical, clinical, biochemical, industrial, nutritional safety, environmental, academic and governmental customers working in research and development, quality assurance and other laboratory applications.

The analytical instrument systems, supplies and services market is highly competitive. In the markets served by Waters, the Company's principal competitors include Agilent Technologies, Inc., Shimadzu Corporation, Bruker Corporation, Danaher Corporation and Thermo Fisher Scientific Inc. In the markets served by TA, the Company's principal competitors include PerkinElmer, Inc., NETZSCH-Geraetebau GmbH, Malvern PANalytical Ltd., Spectris plc, Anton-Paar GmbH and others. The Company competes in its markets primarily on the basis of product performance, reliability, service and, to a lesser extent, price. The Company believes that it is one of the world's largest manufacturers and distributors of LC and LC-MS instrument systems, chromatography columns and other consumables and related services based upon 2024 reports from independent marketing research firms and publicly disclosed sales figures from competitors.

The Company generates revenue through the design, manufacture, sale and service of analytical instrument systems and support products. Revenues are split between product sales and service sales. For the year ended December 31, 2025, product sales were $1,977,100 thousand ¹ and service sales were $1,188,186 thousand ². The Company's customer base includes pharmaceutical accounts, other industrial accounts, universities and governmental agencies. During 2025, 59% ³ of the Company's net sales were to pharmaceutical accounts, 30% ⁴ to other industrial accounts and 11% ⁵ to academic institutions and governmental agencies. The Company has one of the largest direct sales and service organizations focused exclusively on the analytical workflows offered by the Company, serving its customer base with 82 ⁶ sales offices throughout the world as of December 31, 2025 and approximately 4,300 ⁷ field representatives in 2025.

The Waters operating segment is primarily in the business of designing, manufacturing, selling and servicing LC and MS instrument systems, columns and other precision chemistry consumables. Waters instrument systems net sales were $1,101,826 thousand ⁸ in 2025, representing 39% ⁹ of total Waters net sales. Chemistry consumables net sales were $631,458 thousand ¹⁰ in 2025, representing 23% ¹¹ of total Waters net sales. Waters service net sales were $1,080,162 thousand ¹² in 2025, representing 38% ¹³ of total Waters net sales. Total Waters net sales were $2,813,446 thousand ¹⁴ in 2025. The TA operating segment is primarily in the business of designing, manufacturing, selling and servicing thermal analysis, rheometry and calorimetry instruments. TA instrument systems net sales were $243,816 thousand ¹⁵ in 2025, representing 69% ¹⁶ of total TA net sales. TA service net sales were $108,024 thousand ¹⁷ in 2025, representing 31% ¹⁸ of total TA net sales. Total TA net sales were $351,840 thousand ¹⁹ in 2025.

The Company's newest software technology for mass spectrometry is the waters_connect Software platform. In 2025, Waters integrated the MALS instruments with its Empower Software for improved Biologics quality control and simplified regulatory compliance. Also in 2025, Waters acquired Halo Labs, an innovator of specialized imaging technologies to detect, identify, and count interfering materials (particles) in therapeutic products, such as cell, protein and gene therapies. In 2025, the Company introduced the Xevo TQ Absolute XR Mass Spectrometer, the Company's most sensitive, robust, and reliable benchtop tandem quadrupole. In 2025, the Company introduced the Waters Xevo Charge Detection Mass Spectrometer (CDMS), delivering unmatched measurement and characterization for the broadest range of mega-mass biomolecules. In 2025, TA introduced the ElectroForce Apex 1 Mechanical Testing Instrument, specially designed for increased versatility, speed, and ease of use.

On February 9, 2026, the Company completed the acquisition of the BDS Business of Becton, Dickinson and Company for a total purchase price, including assumed debt, of $16.8 billion ²⁰. The Company's net sales increased 7% ²¹ in 2025 following a flat performance in 2024 relative to 2023. Net income was $642,629 thousand ²² in 2025, compared to $637,834 thousand ²³ in 2024 and $642,234 thousand ²⁴ in 2023. Net income per diluted common share was $10.76 ²⁵ in 2025, $10.71 ²⁶ in 2024 and $10.84 ²⁷ in 2023. Operating income was $802,588 thousand ²⁸ in 2025, compared to $826,353 thousand ²⁹ in 2024 and $817,676 thousand ³⁰ in 2023. The Company generated $652,555 thousand ³¹ of net cash provided by operating activities in 2025.

A significant growth vector is the integration of the BDS Business acquired in February 2026. The Company expects to generate cost synergies of approximately $200 million ³² within three years of the completion of the BDS Business Acquisition as a result of manufacturing and supply chain optimization, commercial infrastructure, service and technology streamlining and indirect procurement savings and efficiencies. The Company also expects revenue synergies of approximately $290 million ³³ within five years of the completion of the BDS Business Acquisition as a result of the similarities between the business models of the Company and the BDS Business, certain high-growth adjacencies and cross-selling opportunities. Following the closing of the BDS Business Acquisition, the Company has reorganized the existing and new divisions into the following four segments: Waters Analytical Sciences, Waters Biosciences, Waters Advanced Diagnostics and Waters Materials Sciences.

The Company continues to focus on innovation and new product development. In 2025, Waters expanded the Alliance iS to include the Alliance iS Bio HPLC which includes photodiode array detector that enhance spectral insights for biopharma and quality control customers. The Company expects to bring new microbiology products to market, which may take three to five years to generate significant sales. The Company also continues to integrate artificial intelligence (AI), including generative AI, into its business operations and products and research further uses and opportunities for AI development.

The Company's effective tax rates were 14.9% ³⁴, 15.5% ³⁵ and 12.8% ³⁶ for 2025, 2024 and 2023, respectively. The Company has a Development and Expansion Incentive in Singapore that provides a concessionary income tax rate of 5% ³⁷ on certain types of income for the period April 1, 2021 through March 31, 2026. The effect of applying these concessionary income tax rates rather than the statutory tax rate to income arising from qualifying activities in Singapore increased the Company's net income by $4 million ³⁸ in 2025, $14 million ³⁹ in 2024 and $16 million ⁴⁰ in 2023. The Singapore 2025 benefit of $4 million ⁴¹ and $0.06 ⁴² per diluted share is reduced by $14 million ⁴³ and $0.24 ⁴⁴ per diluted share due to the global minimum tax under Pillar Two, respectively.

In December 2024, the Company's Board of Directors approved the implementation of a new worldwide ERP system, which is expected to provide enhanced operating efficiencies, process alignment, information sharing, and scalability. The Company anticipates spending approximately $130 million ⁴⁵ in connection with the implementation of the new ERP system, of which $52 million ⁴⁶ has been spent on capitalized software and operating expenses through the end of 2025. The Company expects to use existing cash and its credit facility to fund the ERP implementation.

Research and development expenditures for 2025 were $195,711 thousand ⁴⁷. Additions to fixed assets and capitalized software were $112,745 thousand ⁴⁸ in 2025. In December 2024, the Company's Board of Directors authorized the extension of the existing share repurchase program through January 21, 2028, with a remaining authorization of $1.0 billion ⁴⁹. The Company did not make any open market share repurchases in 2025. The Company has not declared or paid any dividends on its common stock in its past three fiscal years and does not intend to pay cash dividends in the foreseeable future.

The Company's international operations may be negatively affected by political events, wars or terrorism, economic conditions, foreign currency fluctuation and regulatory changes. Approximately 69% ⁵⁰ and 68% ⁵¹ of the Company's net sales in 2025 and 2024, respectively, were outside of the U.S. and were primarily denominated in foreign currencies. In 2025, the Company's total net sales from China increased 10% ⁵² as compared to 2024 after decreasing by 10% ⁵³ in 2024 as compared to 2023. The 2024 sales decrease in China resulted from lower customer demand for our products across all customer classes, driven by various factors including a decline in the economic conditions in China, trade tensions and tariffs between the U.S. and China, increased competition from local and international competitors in China, and the Chinese government's ongoing tightening of restrictions on procurement by government-funded customers.

The Company faces risks related to the substantial indebtedness assumed as a result of the BDS Business Acquisition. As of December 31, 2025, the Company had approximately $1.4 billion ⁵⁴ in total debt outstanding. Upon consummation of the BDS Business Acquisition, the Company assumed $4.0 billion ⁵⁵ of indebtedness incurred by SpinCo, which consists of a $3.5 billion ⁵⁶ tranche maturing and payable in full on February 6, 2027 and a $500 million ⁵⁷ tranche maturing and payable in full on February 6, 2028. The Company plans to refinance the $3.5 billion ⁵⁸ tranche in the first quarter of 2026 with long-term bond financing and repay the $500 million ⁵⁹ tranche prior to maturity.

The Company faces significant risks related to the integration of the BDS Business, with potential difficulties including failure to realize anticipated cost synergies of approximately $200 million ⁶⁰ within three years and revenue synergies of approximately $290 million ⁶¹ within five years. The substantial indebtedness assumed, totaling $4.0 billion ⁶² upon closing of the BDS Business Acquisition, could adversely affect operational flexibility and increase borrowing costs. The Company's international operations are exposed to foreign currency exchange rate fluctuations, with approximately 69% ⁶³ of net sales in 2025 outside the U.S. The Company's business in China faces specific headwinds, including a 10% ⁶⁴ decline in sales in 2024 due to lower customer demand, trade tensions, increased competition, and government procurement restrictions. The Company also faces risks related to the development, deployment and use of artificial intelligence in its business operations and products, which may result in harm to the Company's reputation, regulatory action or legal liability.

Management's message emphasizes the transformative nature of the BDS Business Acquisition completed on February 9, 2026, which establishes an innovative global leader in life sciences and diagnostics, enhancing the Company's scale, broadening its capabilities and expanding its presence across attractive end markets. Management highlights the expectation to generate cost synergies of approximately $200 million ⁶⁵ within three years of the completion of the BDS Business Acquisition and revenue synergies of approximately $290 million ⁶⁶ within five years. The Company's strategic priorities for the period ahead include successfully integrating the BDS Business, realizing the anticipated strategic benefits and synergies, and continuing to focus on innovation and new product development to drive organic growth.