Waters Corporation (NYSE: WAT) Reports Second Quarter 2022 Financial Results

02 Aug 2022
Financial StatementSmall molecular drugAcquisitionPatent Infringement
Highlights Sales of $714 million grew 5% as reported and 10% in constant currency Continued strong momentum as instrument sales grew 12% in constant currency, with double-digit growth across LC, MS and TA product lines Broad-based performance across all end-markets and major geographies, led by mid-teens growth in the U.S. and 9% constant currency growth in China Recurring revenues grew high-single-digits as strong commercial execution continued GAAP EPS of $2.72; non-GAAP EPS of $2.75, a 6% increase from prior year MILFORD, Mass.--(BUSINESS WIRE)-- Waters Corporation (NYSE: WAT) today announced its financial results for the second quarter of 2022. “Our team’s strong focus on execution continued to deliver excellent results, despite the challenging macroeconomic environment, with instrument sales growing 12% and recurring revenues growing 8% in constant currency in the second quarter. The sustained commercial momentum and broad-based growth in each of our regions reflects continued strong customer demand across the attractive growth markets that we serve,” said Dr. Udit Batra, President and Chief Executive Officer of Waters Corporation. Dr. Batra continued, “Our rejuvenated portfolio continues to capture growth opportunities in both large and small molecule applications, with ArcTM HPLC, ACQUITYTM Premier, and MaxPeakTM Premier columns again providing a strong contribution to growth in the quarter. Meanwhile, we are increasingly well-positioned to support the workflows of more complex molecules as they move downstream through process development and into high volume applications. With the recent release of the XevoTM G3 Q-TOF and new applications on waters_connectTM, we are continuously adding new capabilities to enhance the characterization and quantitation of biologics and novel modalities.” Second Quarter 2022 Sales for the second quarter of 2022 were $714 million, an increase of 5% as reported and 10% in constant currency, compared to sales of $682 million for the second quarter of 2021. On a GAAP basis, diluted earnings per share (EPS) for the second quarter of 2022 was $2.72, compared to $2.69 for the second quarter of 2021. On a non-GAAP basis, EPS increased by 6% to $2.75, compared to $2.60 for the second quarter of 2021. This includes a headwind of approximately 11% due to unfavorable foreign currency translation. During the second quarter of 2022, sales into the pharmaceutical market increased 5% as reported and 10% in constant currency, sales into the industrial market increased 3% as reported and 8% in constant currency and sales into the academic and government markets increased 10% as reported and 16% in constant currency. During the quarter, instrument system sales increased 7% as reported and 12% in constant currency, while recurring revenues, which represent the combination of service and precision chemistries, increased 3% as reported and 8% in constant currency. Geographically, sales in Asia during the quarter increased 3% as reported and 9% in constant currency (with China sales growing 9%), sales in the Americas increased 14% as reported and 15% in constant currency (with U.S. sales growing 14%) and sales in Europe decreased 4% as reported and increased 7% in constant currency. First Half 2022 Sales for the first half of 2022 were $1,405 million, an increase of 9% as reported and 13% in constant currency, compared to sales of $1,290 million for the first half of 2021. On a GAAP basis, EPS for the first half of 2022 increased to $5.35, compared to $5.05 for the first half of 2021. On a non-GAAP basis, EPS increased by 13% to $5.55, compared to $4.89 in the first half of 2021. For the first half of 2022, sales into the pharmaceutical market increased 10% as reported and 14% in constant currency, sales into the industrial market increased 8% as reported and 12% in constant currency and sales into the academic and government markets increased 5% as reported and 10% in constant currency. For the first half of 2022, instrument system sales increased 15% as reported and 19% in constant currency, while recurring revenues increased 4% as reported and 9% in constant currency. Geographically, sales in Asia for the first half of 2022 increased 7% as reported and 11% in constant currency (with China sales growing 13%), sales in the Americas increased 20% (with U.S. sales growing 21%) and sales in Europe decreased 1% as reported and increased 8% in constant currency. Unless otherwise noted, sales growth and decline percentages are presented on an as-reported basis and are the same as the sales growth and decline percentages presented on a constant currency basis as compared with the same period in the prior year, each of which is detailed in the reconciliation of sales growth rates to constant currency growth rates in the tables below. A description and reconciliation of GAAP to non-GAAP results appear in the tables below and can be found on the Company’s website in the Investor Relations section. Full-Year and Third Quarter 2022 Financial Guidance The Company is raising its full-year 2022 guidance, and now expects constant currency sales growth in the range of 9.5% to 10.5%. Currency translation is expected to decrease full-year sales growth by approximately five percentage points. The Company is reaffirming the mid-point of its full-year 2022 non-GAAP EPS guidance with an updated range of $11.95 to $12.05, which includes an estimated headwind of approximately 9% due to unfavorable foreign currency translation. Please refer to the tables below for a reconciliation of the projected GAAP to non-GAAP financial outlook for the full-year. The Company expects third quarter 2022 constant currency sales growth in the range of 8% to 10%. Currency translation is expected to decrease third quarter sales growth by approximately six percentage points. The Company expects third quarter 2022 non-GAAP EPS in the range of $2.50 to $2.60, which includes an estimated headwind of approximately 10% due to unfavorable foreign currency translation. Please refer to the tables below for a reconciliation of the projected GAAP to non-GAAP financial outlook for the third quarter. Conference Call Waters Corporation will webcast its second quarter 2022 financial results conference call today, August 2, 2022 at 8:00 a.m. Eastern Time. To listen to the call and see the accompanying slide presentation, please visit , select “Investors” under the “About Waters” section, navigate to “Events & Presentations,” and click on the “Webcast.” A replay will be available through at least August 16, 2022 at midnight Eastern Time on the same website by webcast and also by phone at (800) 685-6061. About Waters Corporation Waters Corporation (NYSE: WAT), a global leader in analytical instruments and software, has pioneered chromatography, mass spectrometry and thermal analysis innovations serving the life, materials and food sciences for more than 60 years. With more than 7,800 employees worldwide, Waters operates directly in 35 countries, including 14 manufacturing facilities, and with products available in more than 100 countries. For more information, visit . Non-GAAP Financial Measures This press release contains financial measures, such as constant currency growth rate, adjusted operating income, adjusted net income, adjusted earnings per diluted share and adjusted free cash flow, among others, which are considered “non-GAAP” financial measures under applicable U.S. Securities and Exchange Commission rules and regulations. These non-GAAP financial measures should be considered supplemental to, and not a substitute for, financial information prepared in accordance with U.S. generally accepted accounting principles (GAAP). The Company’s definitions of these non-GAAP measures may differ from similarly titled measures used by others. The non-GAAP financial measures used in this press release adjust for specified items that can be highly variable or difficult to predict. The Company generally uses these non-GAAP financial measures to facilitate management’s financial and operational decision-making, including evaluation of the Company’s historical operating results, comparison to competitors’ operating results and determination of management incentive compensation. These non-GAAP financial measures reflect an additional way of viewing aspects of the Company’s operations that, when viewed with GAAP results and the reconciliations to corresponding GAAP financial measures, may provide a more complete understanding of factors and trends affecting the Company’s business. Because non-GAAP financial measures exclude the effect of items that will increase or decrease the Company’s reported results of operations, management strongly encourages investors to review the Company’s consolidated financial statements and publicly filed reports in their entirety. Reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the tables accompanying this release. Cautionary Statement This release contains “forward-looking” statements regarding future results and events. For this purpose, any statements that are not statements of historical fact may be deemed forward-looking statements. Without limiting the foregoing, the words “feels”, “believes”, “anticipates”, “plans”, “expects”, “intends”, “suggests”, “appears”, “estimates”, “projects” and similar expressions, whether in the negative or affirmative, are intended to identify forward-looking statements. The Company’s actual future results may differ significantly from the results discussed in the forward-looking statements within this release for a variety of reasons, including and without limitation, risks related to the effects of the ongoing COVID-19 pandemic on our business, financial condition, results of operations and prospects, including: portions of our global workforce being unable to work fully and/or effectively due to working remotely, illness, quarantines, government actions, facility closures or other reasons related to the pandemic, increased risks of cyber-attacks resulting from our temporary remote working model, disruptions in our manufacturing capabilities or to our supply chain and distribution network, volatility and uncertainty in global capital markets limiting our ability to access capital, customers being unable to make timely payments for purchases and volatility in demand for our products; foreign exchange rate fluctuations potentially affecting translation of the Company’s future non-U.S. operating results; the impact on demand for the Company’s products, including delays or disruptions to our distribution network, among the Company’s various market sectors or geographies from economic, sovereign and political uncertainties, particularly regarding the effect of new or proposed tariff or trade regulations or changes in the interpretation or enforcement of existing regulations; the effect on the Company’s financial results from the United Kingdom exiting the European Union; fluctuations in expenditures by the Company’s customers, in particular large pharmaceutical companies; introduction of competing products by other companies and loss of market share; pressures on prices from competitors and/or customers; regulatory, economic and competitive obstacles to new product introductions; other changes in demand for the Company’s products from the effect of mergers and acquisitions by the Company’s customers; increased regulatory burdens as the Company’s business evolves, especially with respect to the U.S. Food and Drug Administration and U.S. Environmental Protection Agency, among others; shifts in taxable income in jurisdictions with different effective tax rates; the outcome of tax examinations or changes in respective country legislation affecting the Company’s effective tax rate; the effect of the adoption of new accounting standards; the ability to access capital, maintain liquidity and service the Company’s debt in volatile market conditions, including any potential impact on the Company’s operations stemming from sustained inflation, particularly in the U.S., as a large portion of the Company’s cash is held and operating cash flows are generated outside the U.S.; environmental and logistical obstacles affecting the distribution of products and risks associated with lawsuits and other legal actions, particularly involving claims for infringement of patents and other intellectual property rights; and the impact and costs of war, in particular as a result of the ongoing conflict between Russia and Ukraine, and the possibility of further escalation resulting in a new geopolitical and regulatory instability. Such factors and others are discussed more fully in the sections entitled “Forward-Looking Statements” and “Risk Factors” of the Company’s annual report on Form 10-K for the year ended December 31, 2021, as well as in the sections entitled “Special Note Regarding Forward-Looking Statements” and “Risk Factors” of the Company’s quarterly report on Form 10-Q for the quarterly period ended April 2, 2022, as filed with the Securities and Exchange Commission (“SEC”), which discussions are incorporated by reference in this release, as updated by the Company’s future filings with the SEC. The forward-looking statements included in this release represent the Company’s estimates or views as of the date of this release and should not be relied upon as representing the Company’s estimates or views as of any date subsequent to the date of this release. Except as required by law, the Company does not assume any obligation to update any forward-looking statements. Arc, ACQUITY, MaxPeak, Xevo, and waters_connect are trademarks of Waters Corporation. Waters Corporation and Subsidiaries Consolidated Statements of Operations (In thousands, except per share data) (Unaudited) Three Months Ended Six Months Ended July 2, 2022 July 3, 2021 July 2, 2022 July 3, 2021 Net sales $ 714,319 $ 681,647 $ 1,404,891 $ 1,290,192 Costs and operating expenses: Cost of sales 307,206 280,254 592,891 534,401 Selling and administrative expenses 161,877 158,213 319,352 301,409 Research and development expenses 44,006 44,949 84,478 83,041 Purchased intangibles amortization 1,598 1,809 3,271 3,649 Acquired in-process research and development - - 9,797 - Operating income 199,632 196,422 395,102 367,692 Other income, net (a) 1,535 9,321 1,705 18,680 Interest expense, net (8,893 ) (8,329 ) (17,838 ) (15,174 ) Income from operations before income taxes 192,274 197,414 378,969 371,198 Provision for income taxes 27,410 30,122 54,274 55,779 Net income $ 164,864 $ 167,292 $ 324,695 $ 315,419 Net income per basic common share $ 2.74 $ 2.71 $ 5.38 $ 5.09 Weighted-average number of basic common shares 60,206 61,685 60,399 61,979 Net income per diluted common share $ 2.72 $ 2.69 $ 5.35 $ 5.05 Weighted-average number of diluted common shares and equivalents 60,510 62,157 60,744 62,435 (a) During the three and six months ended July 3, 2021, the Company executed a settlement agreement to resolve patent infringement litigation with Bruker Corporation and Bruker Daltronik GmbH regarding their timsTOF product line. In connection with the settlement, the Company is entitled to receive $10 million in guaranteed payments, including minimum royalty payments, which was recognized within Other income, net in our consolidated statement of operations. During the six months ended July 3, 2021, the Company recorded an unrealized gain of $10 million due to an observable change in the fair value of an existing investment the Company does not have the ability to exercise significant influence over. Waters Corporation and Subsidiaries Reconciliation of GAAP to Adjusted Non-GAAP Net Sales by Operating Segments, Products & Services, Geography and Markets Three Months Ended July 2, 2022 and July 3, 2021 (In thousands) Current Period Constant Three Months Ended Percent Currency Currency July 2, 2022 July 3, 2021 Change Impact Growth Rate (a) NET SALES - OPERATING SEGMENTS Waters $ 635,152 $ 607,324 5 % $ (32,871 ) 10 % TA 79,167 74,323 7 % (3,750 ) 12 % Total $ 714,319 $ 681,647 5 % $ (36,621 ) 10 % NET SALES - PRODUCTS & SERVICES Instruments $ 337,683 $ 314,496 7 % $ (15,681 ) 12 % Service 244,689 240,692 2 % (14,640 ) 8 % Chemistry 131,947 126,459 4 % (6,300 ) 9 % Total Recurring 376,636 367,151 3 % (20,940 ) 8 % Total $ 714,319 $ 681,647 5 % $ (36,621 ) 10 % NET SALES - GEOGRAPHY Asia $ 278,010 $ 269,947 3 % $ (15,887 ) 9 % Americas 257,271 224,894 14 % (418 ) 15 % Europe 179,038 186,806 (4 %) (20,316 ) 7 % Total $ 714,319 $ 681,647 5 % $ (36,621 ) 10 % NET SALES - MARKETS Pharmaceutical $ 437,171 $ 416,705 5 % $ (22,114 ) 10 % Industrial 208,517 202,579 3 % (10,793 ) 8 % Academic & Government 68,631 62,363 10 % (3,714 ) 16 % Total $ 714,319 $ 681,647 5 % $ (36,621 ) 10 % NET SALES - EXCLUDING CHINA Total Net Sales $ 714,319 $ 681,647 5 % $ (36,621 ) 10 % China Net Sales 138,740 127,225 9 % (508 ) 9 % Total Net Sales Excluding China $ 575,579 $ 554,422 4 % $ (36,113 ) 10 % (a) The Company believes that referring to comparable constant currency growth rates is a useful way to evaluate the underlying performance of Waters Corporation's net sales. Constant currency growth rate, a non-GAAP financial measure, measures the change in net sales between current and prior year periods, ignoring the impact of foreign currency exchange rates during the current period. See description of non-GAAP financial measures contained in this release. Waters Corporation and Subsidiaries Reconciliation of GAAP to Adjusted Non-GAAP Net Sales by Operating Segments, Products & Services, Geography and Markets Six Months Ended July 2, 2022 and July 3, 2021 (In thousands) Current Period Constant Six Months Ended Percent Currency Currency July 2, 2022 July 3, 2021 Change Impact Growth Rate (a) NET SALES - OPERATING SEGMENTS Waters $ 1,248,308 $ 1,149,202 9 % $ (48,727 ) 13 % TA 156,583 140,990 11 % (5,331 ) 15 % Total $ 1,404,891 $ 1,290,192 9 % $ (54,058 ) 13 % NET SALES - PRODUCTS & SERVICES Instruments $ 662,905 $ 577,544 15 % $ (21,969 ) 19 % Service 484,421 467,215 4 % (22,803 ) 9 % Chemistry 257,565 245,433 5 % (9,286 ) 9 % Total Recurring 741,986 712,648 4 % (32,089 ) 9 % Total $ 1,404,891 $ 1,290,192 9 % $ (54,058 ) 13 % NET SALES - GEOGRAPHY Asia $ 532,344 $ 499,489 7 % $ (23,458 ) 11 % Americas 506,108 422,251 20 % (419 ) 20 % Europe 366,439 368,452 (1 %) (30,181 ) 8 % Total $ 1,404,891 $ 1,290,192 9 % $ (54,058 ) 13 % NET SALES - MARKETS Pharmaceutical $ 852,943 $ 776,853 10 % $ (33,272 ) 14 % Industrial 417,914 385,852 8 % (14,946 ) 12 % Academic & Government 134,034 127,487 5 % (5,840 ) 10 % Total $ 1,404,891 $ 1,290,192 9 % $ (54,058 ) 13 % NET SALES - EXCLUDING CHINA Total Net Sales $ 1,404,891 $ 1,290,192 9 % $ (54,058 ) 13 % China Net Sales 259,772 230,144 13 % 342 13 % Total Net Sales Excluding China $ 1,145,119 $ 1,060,048 8 % $ (54,400 ) 13 % (a) The Company believes that referring to comparable constant currency growth rates is a useful way to evaluate the underlying performance of Waters Corporation's net sales. Constant currency growth rate, a non-GAAP financial measure, measures the change in net sales between current and prior year periods, ignoring the impact of foreign currency exchange rates during the current period. See description of non-GAAP financial measures contained in this release. Waters Corporation and Subsidiaries Reconciliation of GAAP to Adjusted Non-GAAP Financials Three and Six Months Ended July 2, 2022 and July 3, 2021 (In thousands, except per share data) Acquired Income from IPR&D and Operations Selling & Research & Operating Other before Provision for Diluted Administrative Development Operating Income Income Income Income Net Earnings Expenses(a) Expenses Income Percentage (Expense) Taxes Taxes Income per Share Three Months Ended July 2, 2022 GAAP $ 163,475 $ 44,006 $ 199,632 27.9 % $ 1,535 $ 192,274 $ 27,410 $ 164,864 $ 2.72 Adjustments: Purchased intangibles amortization (b) (1,598 ) - 1,598 0.2 % - 1,598 366 1,232 0.02 Restructuring costs and certain other items (d) (1,830 ) - 1,830 0.3 % (1,818 ) 12 (5 ) 17 - Certain income tax items (f) - - - - - - (506 ) 506 0.01 Adjusted Non-GAAP $ 160,047 $ 44,006 $ 203,060 28.4 % $ (283 ) $ 193,884 $ 27,265 $ 166,619 $ 2.75 Three Months Ended July 3, 2021 GAAP $ 160,022 $ 44,949 $ 196,422 28.8 % $ 9,321 $ 197,414 $ 30,122 $ 167,292 $ 2.69 Adjustments: Purchased intangibles amortization (b) (1,809 ) - 1,809 0.3 % - 1,809 411 1,398 0.02 Restructuring costs and certain other items (d) (614 ) - 614 0.1 % - 614 44 570 0.01 Litigation settlement (e) - - - - (10,083 ) (10,083 ) (1,916 ) (8,167 ) (0.13 ) Certain income tax items (f) - - - - - - (594 ) 594 0.01 Adjusted Non-GAAP $ 157,599 $ 44,949 $ 198,845 29.2 % $ (762 ) $ 189,754 $ 28,067 $ 161,687 $ 2.60 Six Months Ended July 2, 2022 GAAP $ 322,623 $ 94,275 $ 395,102 28.1 % $ 1,705 $ 378,969 $ 54,274 $ 324,695 $ 5.35 Adjustments: Purchased intangibles amortization (b) (3,271 ) - 3,271 0.2 % - 3,271 749 2,522 0.04 Acquired in-process research and development (c) - (9,797 ) 9,797 0.7 % - 9,797 2,351 7,446 0.12 Restructuring costs and certain other items (d) (4,205 ) - 4,205 0.3 % (2,234 ) 1,971 456 1,515 0.02 Certain income tax items (f) - - - - - - (994 ) 994 0.02 Adjusted Non-GAAP $ 315,147 $ 84,478 $ 412,375 29.4 % $ (529 ) $ 394,008 $ 56,836 $ 337,172 $ 5.55 Six Months Ended July 3, 2021 GAAP $ 305,058 $ 83,041 $ 367,692 28.5 % $ 18,680 $ 371,198 $ 55,779 $ 315,419 $ 5.05 Adjustments: Purchased intangibles amortization (b) (3,649 ) - 3,649 0.3 % - 3,649 825 2,824 0.05 Restructuring costs and certain other items (d) (1,484 ) - 1,484 0.1 % (9,707 ) (8,223 ) (2,076 ) (6,147 ) (0.10 ) Litigation settlement (e) - - - - (10,083 ) (10,083 ) (1,916 ) (8,167 ) (0.13 ) Certain income tax items (f) - - - - - - (1,144 ) 1,144 0.02 Adjusted Non-GAAP $ 299,925 $ 83,041 $ 372,825 28.9 % $ (1,110 ) $ 356,541 $ 51,468 $ 305,073 $ 4.89 (a) Selling & administrative expenses include purchased intangibles amortization, litigation provisions and settlements and asset impairments. (b) The purchased intangibles amortization, a non-cash expense, was excluded to be consistent with how management evaluates the performance of its core business against historical operating results and the operating results of competitors over periods of time. (c) Acquired in-process research and development was excluded as it relates to the cost of a licensing arrangement for charge detection mass spectrometry that the Company believes is unusual and not indicative of its normal business operations. (d) Restructuring costs, mergers and acquisition costs and certain other items were excluded as the Company believes that the cost to consolidate operations, reduce overhead, acquire companies and certain other income or expense items are not normal and do not represent future ongoing business expenses of a specific function or geographic location of the Company. (e) Litigation settlement gains and provisions were excluded as these items are isolated, unpredictable and not expected to recur regularly. (f) Certain income tax items were excluded as these non-cash expenses and benefits represent updates in management's assessment of ongoing examinations or other tax items that are not indicative of the Company’s normal or future income tax expense. Waters Corporation and Subsidiaries Preliminary Condensed Unclassified Consolidated Balance Sheets (In thousands and unaudited) July 2, 2022 December 31, 2021 Cash, cash equivalents and investments $ 419,794 $ 569,285 Accounts receivable 639,451 612,648 Inventories 409,922 356,095 Property, plant and equipment, net 545,813 547,913 Intangible assets, net 225,101 242,401 Goodwill 428,005 437,865 Other assets 372,484 328,725 Total assets $ 3,040,570 $ 3,094,932 Notes payable and debt $ 1,484,374 $ 1,513,870 Other liabilities 1,164,072 1,213,508 Total liabilities 2,648,446 2,727,378 Total stockholders' equity 392,124 367,554 Total liabilities and stockholders' equity $ 3,040,570 $ 3,094,932 Waters Corporation and Subsidiaries Preliminary Condensed Consolidated Statements of Cash Flows Three and Six Months Ended July 2, 2022 and July 3, 2021 (In thousands and unaudited) Three Months Ended Six Months Ended July 2, 2022 July 3, 2021 July 2, 2022 July 3, 2021 Cash flows from operating activities: Net income $ 164,864 $ 167,292 $ 324,695 $ 315,419 Adjustments to reconcile net income to net cash provided by operating activities: Stock-based compensation 9,789 7,291 20,722 15,596 Depreciation and amortization 34,227 33,387 66,891 64,743 Change in operating assets and liabilities and other, net (151,902 ) (64,930 ) (157,370 ) (34,314 ) Net cash provided by operating activities 56,978 143,040 254,938 361,444 Cash flows from investing activities: Additions to property, plant, equipment and software capitalization (39,269 ) (37,386 ) (67,020 ) (76,889 ) (Investments in) proceeds from equity investments, net (1,139 ) - 5,646 - Payments for intellectual property licenses - (7,000 ) (4,897 ) (7,000 ) Net change in investments 21,739 (77,716 ) 66,594 (197,217 ) Net cash (used in) provided by investing activities (18,669 ) (122,102 ) 323 (281,106 ) Cash flows from financing activities: Net change in debt 40,000 (100,000 ) (30,000 ) 246,363 Proceeds from stock plans 18,082 28,741 30,914 45,036 Purchases of treasury shares (151,808 ) (168,202 ) (321,944 ) (341,507 ) Other cash flow from financing activities, net 10,956 2,495 10,849 1,917 Net cash used in financing activities (82,770 ) (236,966 ) (310,181 ) (48,191 ) Effect of exchange rate changes on cash and cash equivalents (16,712 ) (7,699 ) (27,417 ) (8,786 ) (Decrease) increase in cash and cash equivalents (61,173 ) (223,727 ) (82,337 ) 23,361 Cash and cash equivalents at beginning of period 480,070 683,783 501,234 436,695 Cash and cash equivalents at end of period $ 418,897 $ 460,056 $ 418,897 $ 460,056 Reconciliation of GAAP Cash Flows from Operating Activities to Free Cash Flow (a) Net cash provided by operating activities - GAAP $ 56,978 $ 143,040 $ 254,938 $ 361,444 Adjustments: Additions to property, plant, equipment and software capitalization (39,269 ) (37,386 ) (67,020 ) (76,889 ) Tax reform payments 38,454 38,454 38,454 38,454 Litigation settlements received - (3,367 ) (584 ) (3,367 ) Major facility renovations 11,112 13,795 17,039 28,285 Free Cash Flow - Adjusted Non-GAAP $ 67,275 $ 154,536 $ 242,827 $ 347,927 (a) The Company defines free cash flow as net cash flow from operations accounted for under GAAP less capital expenditures and software capitalizations plus or minus any unusual and non recurring items. Free cash flow is not a GAAP measurement and may not be comparable to free cash flow reported by other companies. Waters Corporation and Subsidiaries Reconciliation of Projected GAAP to Adjusted Non-GAAP Financial Outlook Three Months Ended Twelve Months Ended October 1, 2022 December 31, 2022 Range Range Projected Sales Projected constant currency sales growth rate (a) 8.0 % - 10.0 % 9.5 % - 10.5 % Projected currency impact (6.0 %) - (6.0 %) (5.0 %) - (5.0 %) Projected sales growth rate as reported 2.0 % - 4.0 % 4.5 % - 5.5 % Projected Earnings Per Diluted Share Range Range Projected GAAP earnings per diluted share $ 2.48 - $ 2.58 $ 11.71 - $ 11.81 Adjustments: Purchased intangibles amortization $ 0.02 - $ 0.02 $ 0.08 - $ 0.08 Acquired in-process research and development $ - $ - $ 0.12 $ 0.12 Restructuring costs and certain other items $ - - $ - $ 0.02 - $ 0.02 Certain income tax items $ - - $ - $ 0.02 - $ 0.02 Projected adjusted non-GAAP earnings per diluted share $ 2.50 - $ 2.60 $ 11.95 - $ 12.05 (a) Constant currency growth rates are a non-GAAP financial measure that measures the change in net sales between current and prior year periods, ignoring the impact of foreign currency exchange rates during the current period. These amounts are estimated at the current foreign currency exchange rates and based on the forecasted geographical sales in local currency, as well as an assessment of market conditions as of today, and may differ significantly from actual results. These forward-looking adjustment estimates do not reflect future gains and charges that are inherently difficult to predict and estimate due to their unknown timing, effect and/or significance. View source version on businesswire.com: Contacts Caspar Tudor, Head of Investor Relations – (508) 482-2429 Source: Waters Corporation View this news release online at:
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