Waters Corporation

Company Overview

Business Model: Waters Corporation designs, manufactures, sells, and services high-performance liquid chromatography ("HPLC"), ultra-performance liquid chromatography ("UPLC," and together with HPLC, "LC"), and mass spectrometry ("MS") technology systems and support products. This includes chromatography columns, other consumable products, and comprehensive post-warranty service plans. These systems are often employed together as integrated LC-MS instrument systems using common software platforms. Additionally, the Company designs, manufactures, sells, and services thermal analysis, rheometry, and calorimetry instruments through its TA Instruments product line. Waters Corporation also develops and supplies advanced software-based products that interface with its own and other manufacturers' instruments. The Company's products are utilized by pharmaceutical, clinical, biochemical, industrial, nutritional safety, environmental, academic, and governmental customers for research and development, quality assurance, and other laboratory applications.

Market Position: Waters Corporation is a global leader in analytical instruments and software, with over 65 years of innovation in chromatography, mass spectrometry, and thermal analysis. Based on 2024 reports from independent marketing research firms and publicly disclosed sales figures from competitors, the Company believes it is one of the world’s largest manufacturers and distributors of LC and LC-MS instrument systems, chromatography columns, other consumables, and related services. The Company's service offerings are considered highly differentiated, evidenced by consistent increases in annual service revenues. Waters Corporation competes primarily on product performance, reliability, and service.

Recent Strategic Developments:

• Wyatt Technology Acquisition (May 2023): Acquired Wyatt Technology, a pioneer in innovative light scattering and field-flow fractionation instruments, software, accessories, and services, for $1.3 billion in cash. This expanded Waters Corporation's portfolio and increased exposure to large molecule applications.
• DynaPro ZetaStar Instrument (2023): Introduced through the Wyatt Technology portfolio for nanoparticle analysis, combining dynamic and static light scattering with dynamic and electrophoretic light scattering measurements in one device for increased sensitivity and faster measurements in complex biologics development.
• HPLC CONNECT Software (2024): Launched an all-in-one software platform enabling full digital synchronization between Waters Corporation's HPLC/UPLC systems and multi-angle light-scattering instruments (MALS) from its Wyatt Technology portfolio, enhancing efficiency for SEC-MALS analyses in biopharmaceutical innovations.
• XBridge Premier GTx BEH Size Exclusion Chromatography Columns (2023): Introduced a new line of columns to improve analysis and lower costs for gene therapies (AAV vectors), doubling the speed of potency and safety measurements.
• Alliance iS HPLC System (2023): Introduced as a next-generation intelligent HPLC System designed to reduce compliance risk with proactive error detection, troubleshooting, and ease-of-use, integrating with Waters Corporation's Empower Chromatography Software and eConnect HPLC Columns.
• Oasis WAX/GCB and GCB/WAX for PFAS Analysis Cartridges (2024): Introduced new cartridges with design features to streamline and expedite sample preparation and analysis of per- and polyfluoroalkyl substances ("PFAS").
• Alliance iS Bio HPLC System (2024): Launched with new capabilities for biopharma quality control laboratories, combining advanced bio-separation technology and built-in instrument intelligence to boost efficiency and eliminate common errors.
• GTxResolve Premier Size Exclusion Chromatography 1000Å 3-micron (3 µm) Columns (2024): Implemented novel packing materials and MaxPeak Premier High-Performance Surface technology to accelerate gene-based therapeutics development.
• Xevo TQ Absolute IVD Mass Spectrometer (2023): Expanded the MassTrak IVD LC-MS/MS Systems family for clinical diagnostic applications, offering up to five times more sensitivity and a 45% smaller footprint, using 50% less nitrogen gas and electricity.
• Targeted Imaging Mass Spectrometer (2023): Introduced the industry's first targeted imaging mass spectrometer based on the Xevo TQ Absolute Tandem Quadrupole Mass Spectrometer, combining with the Waters DESI XS source for five times more sensitivity and speed in small molecule drug product analysis.
• SELECT SERIES MRT System Updates (2023): Increased specificity and utility for UPLC-MS/MS metabolomics and drug discovery, offering 50% higher resolution (300,000 FWHM), a 3X faster scan rate, and parts-per-billion mass accuracy.
• BioAccord LC-MS System and Waters Andrew+ Pipetting Robot Integration (2023): Combined via new protocols in OneLab Software to create integrated bioprocess walk-up solutions, enabling less experienced LC-MS users to acquire critical quality attribute data directly at the bioproduction laboratory.
• New Battery Cycler Microcalorimeter Solution (2023): Introduced by TA Instruments for high-resolution characterization of battery cells, reducing experiment time from months to weeks.
• Rheo-IS Accessory for Discovery Hybrid Rheometers (2024): Introduced by TA Instruments for simultaneous electrical impedance and rheological measurements, critical for new battery formulations.
• Rapid Screening-Differential Scanning Calorimeter ("RS-DSC") (2024): Introduced by TA Instruments for biopharmaceutical developers, offering high-throughput DSC for precise thermal stability testing of high-concentration biologic formulations.
• Discovery Core Rheometer (2024): Introduced by TA Instruments as a streamlined rheometer for routine manufacturing quality control and assurance laboratories, featuring an easy-to-use touchscreen interface.

Geographic Footprint: Waters Corporation operates directly in over 35 countries and has products available in more than 100 countries. Approximately 68% of the Company’s net sales in 2024 were outside of the United States. Key manufacturing operations are located in Ireland, the U.K., Singapore, and the U.S. (Milford, Massachusetts; Taunton, Massachusetts; Golden, Colorado; Santa Barbara, California; New Castle, Delaware; Eden Prairie, Minnesota; Lindon, Utah). The Company has 79 sales offices worldwide and 64 field offices (9 in the U.S., 55 internationally).

Financial Performance

Revenue Analysis

Profitability Metrics (2024):

• Gross Margin: 59.4% ($1,758,186 / $2,958,387)
• Operating Margin: 27.9% ($826,353 / $2,958,387)
• Net Margin: 21.6% ($637,834 / $2,958,387)

Investment in Growth:

• R&D Expenditure: $183,027 thousand (6.2% of total net sales)
• Capital Expenditures: $142,481 thousand (additions to property, plant, equipment and software capitalization)
• Strategic Investments: $1.3 billion in cash for the acquisition of Wyatt Technology in May 2023.

Business Segment Analysis

The Company’s two operating segments, Waters and TA, have similar economic characteristics, product processes, products and services, types and classes of customers, methods of distribution, and regulatory environments. Due to these similarities, the two segments have been aggregated into one reporting segment for financial statement purposes. However, detailed revenue breakdowns are provided for each.

Waters Operating Segment

Financial Performance:

• Total Waters Net Sales (2024): $2,604,421 thousand (0% YoY vs. 2023)
• Waters Instrument Systems Revenue (2024): $1,032,493 thousand (-7% YoY)
• Waters Chemistry Consumables Revenue (2024): $565,481 thousand (+4% YoY)
• Waters Service Revenue (2024): $1,006,447 thousand (+6% YoY)
• Operating Margin: Not separately disclosed for the segment.
• Key Growth Drivers: Continued demand in most major geographies for chemistry consumables (columns and application-specific testing kits to pharmaceutical customers) and higher service demand billing. Wyatt sales increased Waters products and service sales by approximately 1% in 2024.
• Key Headwinds: Weaker customer demand in China, where Waters instrument sales declined 12% in 2024. Foreign currency translation decreased Waters sales growth by 1% in 2024.

Product Portfolio:

• High-Performance and Ultra-Performance Liquid Chromatography (HPLC/UPLC): ACQUITY UPLC System, Alliance iS HPLC System, Alliance iS Bio HPLC System.
• Mass Spectrometry (MS) and Liquid Chromatography-Mass Spectrometry (LC-MS): Xevo TQ Absolute System, Xevo G3 Q-Tof Mass Spectrometer, SYNAPT G2-S HDMS System, Xevo TQ Absolute IVD Mass Spectrometer, SELECT SERIES MRT System.
• Precision Chemistry Consumables: Chromatography columns (e.g., ACQUITY UPLC Columns, Waters XBridge Premier GTx BEH size exclusion chromatography columns, GTxResolve Premier Size Exclusion Chromatography 1000Å 3-micron Columns), Certified Reference Materials, Proficiency Testing products (e.g., Oasis WAX/GCB and GCB/WAX for PFAS Analysis Cartridges).
• Software: HPLC CONNECT software, waters_connect Software platform (including CONFIRM Sequence, Extraction+ Connected Device, System Monitoring Software), OneLab Software.
• Light Scattering (from Wyatt Technology acquisition): DynaPro ZetaStar instrument for nanoparticle analysis.

Market Dynamics:

• Waters Corporation is a technology and market leader in LC and MS.
• Products are used extensively in pharmaceutical and life science industries for drug discovery, development, quality control, and process engineering.
• Also used in nutritional safety, environmental testing, chemical, consumer products, and clinical diagnostic applications (e.g., newborn screening, therapeutic drug management).
• Increasing trend of customers purchasing integrated LC-MS components.

TA Operating Segment

Financial Performance:

• Total TA Net Sales (2024): $353,966 thousand (0% YoY vs. 2023)
• TA Instrument Systems Revenue (2024): $246,202 thousand (-3% YoY)
• TA Service Revenue (2024): $107,764 thousand (+6% YoY)
• Operating Margin: Not separately disclosed for the segment.
• Key Growth Drivers: Broad-based sales growth across most major geographies (excluding China) driven by strong customer demand for thermal analysis instruments and services.
• Key Headwinds: Weakness in China. Foreign currency translation decreased sales growth by 1% in 2024.

Product Portfolio:

• Thermal Analysis, Rheometry, and Calorimetry Instruments: Discovery Hybrid Rheometers (with Rheo-IS accessory), Rapid Screening-Differential Scanning Calorimeter ("RS-DSC"), Discovery Core Rheometer, Battery Cycler Microcalorimeter Solution.
• Software: TRIOS AutoPilot Software (with Polymer Workflow Guided Methods).

Market Dynamics:

• Instruments are heavily used in material testing laboratories.
• Applications include predicting suitability and stability of fine chemicals, pharmaceuticals, water, polymers, metals, and viscous liquids in industrial, consumer goods, healthcare, and life science research.

Capital Allocation Strategy

Shareholder Returns:

• Share Repurchases (2024): $13,541 thousand (related to vesting of restricted stock units, no open market repurchases).
• Share Repurchases (2023): $70,277 thousand (0.2 million shares).
• Share Repurchases (2022): $626,061 thousand (2.0 million shares).
• Dividend Payments: Waters Corporation 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.
• Future Capital Return Commitments: The Board of Directors authorized the extension of the existing share repurchase program through January 21, 2028, with a remaining authorization of $1.0 billion.

Balance Sheet Position (as of December 31, 2024):

• Cash and Cash Equivalents: $324,421 thousand
• Total Debt: $1,626,488 thousand (Long-term debt)
• Net Cash Position: -$1,302,067 thousand (Net Debt)
• Credit Rating: Not explicitly disclosed, but debt covenants are customary for investment grade credit facilities.
• Debt Maturity Profile:
  • 2025: $0 thousand
  • 2026: $830,000 thousand
  • 2027: $0 thousand
  • 2028: $50,000 thousand
  • 2029: $300,000 thousand
  • Thereafter (2030-2031): $450,000 thousand
  • Total: $1,630,000 thousand (principal on long-term debt)
• Interest on Senior Unsecured Notes: $150,000 thousand remaining cash requirements, with $38,000 thousand due in 2025.

Cash Flow Generation:

• Operating Cash Flow (2024): $762,123 thousand
• Free Cash Flow (2024): $619,642 thousand (Operating Cash Flow - Capital Expenditures of $142,481 thousand)
• Cash Conversion Metrics: Lower inventory levels and improved working capital contributed to increased operating cash flow in 2024.

Operational Excellence

Production & Service Model: Waters Corporation oversees each stage of production for its instruments, columns, and chemical reagents to ensure high product quality.

• LC Instruments: Assembled at Milford, Massachusetts facility (machining, assembly, testing). Manufacturing of certain electronic components and LC instrument systems/components is outsourced to vendors and contract manufacturing firms in Singapore.
• LC Columns: Primarily manufactured and distributed at facilities in Taunton, Massachusetts (expanded in February 2024 for $251 million between 2018-2024) and Wexford, Ireland. These facilities process, size, and treat silica and polymeric media. VICAM manufactures antibody-linked resins and magnetic beads in Milford, Massachusetts.
• Analytical Standards and Reagents & Environmental Resource Associates ("ERA") product lines: Manufactured and distributed at Golden, Colorado facility, with some ERA products also in Wexford, Ireland.
• MS Products: Manufactured and distributed at Wilmslow, England and Wexford, Ireland facilities. A new facility in Birmingham, England opened in 2024 to increase capacity for MS instrument components. Final assembly, calibration, and quality control are performed by Waters Corporation engineers.
• TA Products: Manufactured and distributed at New Castle, Delaware, Eden Prairie, Minnesota, Lindon, Utah, and Hüllhorst, Germany facilities. Elements are manufactured by outside contractors, with final assembly, calibration, and quality control at Waters Corporation facilities.
• Wyatt Products: Instrument manufacturing takes place at Santa Barbara, California facilities.
• Service Delivery: Services enable customers to maximize technology productivity, support compliance, and provide transparency into enterprise resource management efficiencies. Service offerings include support plans, demand services, spare parts, customer performance validation, and training.

Supply Chain Architecture: Key Suppliers & Partners:

• Electronic Components: Outsourced to outside vendors meeting quality requirements.
• LC Instrument Manufacturing: Contract manufacturing firms in Singapore.
• Raw Materials: High temperature alloy sheet metal, castings, forgings, pre-plated metals, and electrical components from various vendors. Generally available from multiple sources.
• Conflict Minerals: Subject to SEC rules under Dodd-Frank Act; unable to determine country of origin for some conflict minerals in 2024, but no knowledge of origin from Democratic Republic of the Congo or adjoining countries.

Facility Network:

• Manufacturing: Milford, Massachusetts (LC), Taunton, Massachusetts (LC columns), Wexford, Ireland (LC columns, MS, TA components), Wilmslow, England (MS), Birmingham, England (MS components), New Castle, Delaware (TA), Eden Prairie, Minnesota (TA), Lindon, Utah (TA), Hüllhorst, Germany (TA), Santa Barbara, California (Wyatt products), Golden, Colorado (Analytical Standards, ERA).
• Research & Development: Milford, Massachusetts (LC), England (MS), New Castle, Delaware (materials characterization), Cambridge, MA, University of Delaware.
• Distribution: Taunton, Massachusetts, Wexford, Ireland, Singapore (Asian outsourced manufacturing and product distribution).
• Certifications: Milford, Taunton, Wexford, Golden, Wilmslow, New Castle, Eden Prairie, Lindon, Santa Barbara facilities hold various ISO certifications (e.g., ISO 9001:2015, ISO 13485:2016, ISO 14001:2015, ISO 45001:2018, ISO/IEC 17025:2017, ISO/IEC 17034:16, TNI Standard Vol. 3:2016) and adhere to applicable regulatory requirements (e.g., FDA Quality System Regulation, European In-Vitro Diagnostic Directive).

Operational Metrics: Not explicitly disclosed beyond general statements about quality and efficiency.

Market Access & Customer Relationships

Go-to-Market Strategy: Distribution Channels:

• Direct Sales: One of the largest direct sales and service organizations focused exclusively on analytical workflows, with 79 sales offices worldwide and approximately 4,200 field representatives in 2024. Sales representatives manage account relationships.
• Digital Platforms: Comprehensive information through corporate and geographic-specific internet websites, product literature, and electronic ordering facilities/dedicated catalog for consumable products.
• Service: Field service representatives install instruments, train customers, and minimize downtime. In-house and field-based technical support provide application assistance.

Customer Portfolio: Enterprise Customers:

• Pharmaceutical Accounts: Represents the Company’s largest sector, accounting for 58% of net sales in 2024 (vs. 57% in 2023 and 59% in 2022). Includes multinational pharmaceutical companies, generic drug manufacturers, contract research organizations ("CROs"), and biotechnology companies.
• Other Industrial Accounts: 31% of net sales in 2024. Includes chemical manufacturers, polymer manufacturers, food and beverage companies, and environmental testing laboratories.
• Academic and Governmental Agencies: 11% of net sales in 2024. Includes universities, research institutions, and governmental agencies (e.g., United States Food and Drug Administration, United States Environmental Protection Agency).
• Customer Concentration: No single customer accounted for more than 2% of the Company’s net sales during fiscal years 2024, 2023, and 2022.

Geographic Revenue Distribution (2024):

• Asia: 32.8% of total net sales ($969,222 thousand)
  • China: 13.4% ($396,599 thousand)
  • Japan: 5.3% ($157,321 thousand)
  • Asia Other: 14.0% ($415,302 thousand)
• Americas: 37.7% of total net sales ($1,115,780 thousand)
  • United States: 31.6% ($933,926 thousand)
  • Americas Other: 6.1% ($181,854 thousand)
• Europe: 29.5% of total net sales ($873,385 thousand)

Competitive Intelligence

Market Structure & Dynamics

Industry Characteristics: The analytical instrument systems, supplies, and services market is highly competitive. The market for consumable LC products is also highly competitive and generally more fragmented than the analytical instruments market. Industry Trends: Rapidly changing technology, continuous introduction of new products by competitors, and consolidation among competitors. Customer Spending: Purchase of instrument systems is often dependent on customers’ capital spending or funding, which can fluctuate.

Competitive Positioning Matrix:

Direct Competitors

Primary Competitors (Waters segment): Agilent Technologies, Inc., Shimadzu Corporation, Bruker Corporation, Danaher Corporation, and Thermo Fisher Scientific Inc. Primary Competitors (TA segment): PerkinElmer, Inc., NETZSCH-Geraetebau GmbH, Thermo Fisher Scientific Inc., Malvern PANalytical Ltd. (a subsidiary of Spectris plc), Anton-Paar GmbH. Primary Competitors (Consumable LC products): Danaher Corporation, Merck KGaA, Agilent Technologies, Inc., General Electric Company, and Thermo Fisher Scientific Inc.

Emerging Competitive Threats: New, disruptive technologies that could displace existing technologies; more effective or less costly products from competitors; changes in ownership, mergers, and continued consolidations among competitors. The development, deployment, and use of artificial intelligence ("AI") by competitors could negatively impact Waters Corporation's competitiveness if it fails to timely and effectively use AI.

Competitive Response Strategy: Waters Corporation's corporate strategy is based on organic innovation and deep application expertise. It continuously invests in new product development and existing product enhancements, as well as strategic acquisitions (e.g., Wyatt Technology) to expand its portfolio and market exposure. The Company believes the expansion of the ACQUITY UPLC Instrument base will enhance its chromatographic column business due to high synergy with ACQUITY UPLC Columns.

Risk Assessment Framework

Strategic & Market Risks

Market Dynamics:

• Customer Demand Fluctuations: Demand is dependent on market size, customer capital spending, governmental regulations (drug, food, water testing), funding for academic/governmental institutions, health policy, export controls, and general economic conditions. Unfavorable market conditions in the pharmaceutical sector (58% of 2024 net sales) or consolidations could adversely affect results.
• Competition: Highly competitive market with continuous new product introductions and potential for more effective or less expensive products. Competitors may have greater financial resources and broader distribution.
• Technology Obsolescence: Rapidly changing technology could make product lines obsolete if the Company fails to continually improve existing products and develop new ones in a timely manner.
• AI Development & Use: Risks associated with integrating AI into business operations and products, including harm to reputation, regulatory action, legal liability from inadequate or deficient AI (e.g., flawed algorithms), delays in new product offerings, and significant investment requirements. Evolving legal and regulatory landscape for AI presents compliance challenges.
• Acquisition Integration: Risks associated with previous or future acquisitions (e.g., Wyatt Technology), including integration difficulties, diversion of management attention, inability to predict financial results, potential departures of key employees, and increased debt/contingent liabilities.

Operational & Execution Risks

Supply Chain Vulnerabilities:

• Supplier Dependency: Reliance on limited or single sources for certain raw materials and components. Disruption or price increases from these suppliers could temporarily affect shipments, financial results, and customer relationships.
• Outside Contractor Dependency: Reliance on outside contractors for certain LC and MS instrument components (e.g., Singapore firms). Failure to perform timely or at quality levels could affect the supply chain and financial results.
• Disruption of Operations: Prolonged disruption at manufacturing facilities (U.S., U.K., Ireland, Germany, Singapore, California) due to labor difficulties, damage, power interruptions, cybersecurity incidents, or natural disasters could harm customer relationships and sales.
• ERP System Transition: Implementation of a new worldwide ERP system is a multi-year process requiring significant human and financial resources. Risks include increased costs, delays, potential instability, and adverse effects on order processing, shipping, invoicing, and internal controls.
• Product Errors: Software or hardware may contain coding or manufacturing errors, leading to delays in new product releases, security vulnerabilities, product liability claims, and reputational harm.

Financial & Regulatory Risks

Market & Financial Risks:

• Foreign Currency Exchange Rate Fluctuations: Approximately 68% of 2024 net sales were outside the U.S., primarily denominated in foreign currencies. Fluctuations, especially against the euro, Japanese yen, British pound, and Chinese renminbi, can materially affect operating results. Hedging strategies are employed but effectiveness is not guaranteed.
• Global Economic Conditions: Adverse effects from changes in inflation (cost of raw materials) and interest rates, potentially leading to declining sales, increased order cancellations, excess inventory, longer sales cycles, and collection difficulties.
• Access to Capital: Disruption in worldwide financial markets could impair access to existing cash, credit facilities, or new capital, increasing borrowing costs.
• Debt Covenants: Existing and future debt may be subject to restrictive covenants and financial ratio tests (e.g., interest coverage ratio, leverage ratio). Failure to comply could result in default and accelerated debt repayment.
• Impairment Charges: Significant negative industry/economic trends or integration difficulties for acquired businesses (e.g., Wyatt Technology) could lead to impairment charges for goodwill and other intangible assets ($1.9 billion net carrying value as of December 31, 2024).
• Retirement Plan Changes: Changes in regulations or market value of plan assets could adversely impact cash flows or results of operations.
• Cash Flow Sufficiency: Need to generate sufficient cash flow from operations, existing credit facilities, or new capital to fund operations, capital expenditures, debt service, share repurchases, and acquisitions.

Regulatory & Compliance Risks:

• Governmental Regulations: Subject to various federal, state, and foreign regulations (health and safety, import/export, privacy, FCPA, environmental, FDA, EPA). Non-compliance could result in product recalls, fines, operational restrictions, or cessation of operations.
• Data Privacy Laws: Subject to varying data privacy laws (U.S., EU, U.K.). Violations could lead to regulatory fines, legal liability, and reputational damage. Compliance creates significant costs.
• Conflict Minerals: Ongoing evaluation of supply chain for conflict minerals may impose additional costs and risks in verifying origin.
• Government Contracts: Subject to specific laws and regulations for government contracts. Failure to comply could result in contract suspension, penalties, or debarment.
• ESG Issues: Failure to meet evolving regulatory requirements or stakeholder expectations regarding ESG matters (environmental stewardship, human capital, governance) could negatively impact reputation, brand, employee retention, and investor capital.
• Legal Proceedings: Subject to various lawsuits, claims, investigations, and regulatory proceedings in the ordinary course of business. Outcomes are uncertain and could be unfavorable.

Geopolitical & External Risks

Geopolitical Exposure:

• International Operations: Approximately 68% of 2024 net sales were outside the U.S. Operations are subject to political events, wars (e.g., Russia-Ukraine, Middle East), terrorism, economic conditions, and regulatory changes.
• China Market Risks: Significant 30% reduction in sales from China in 2024 (vs. 2022) due to declining economic conditions, U.S.-China trade tensions/tariffs, increased local competition, and tightening government procurement restrictions. These factors may continue to adversely affect business in China.
• Trade Relations: Changes in U.S. trade policy (e.g., tariffs) could trigger retaliatory actions, increasing costs and impacting sales in affected countries.
• Public Health Crises: Global operations expose the Company to risks from public health crises, epidemics, or pandemics, which could negatively impact sales and cash flow.

Innovation & Technology Leadership

Research & Development Focus: Core Technology Areas:

• Chromatography (LC/UPLC): Development of new packing materials (e.g., small, uniform diameter particles for UPLC), instrument systems (ACQUITY UPLC System, Alliance iS HPLC System), and columns (XBridge Premier GTx BEH, GTxResolve Premier Size Exclusion Chromatography).
• Mass Spectrometry (MS/LC-MS): Development of various MS instrument systems (quadrupole, ion trap, time-of-flight, ion mobility designs), including Xevo TQ Absolute System, Xevo G3 Q-Tof Mass Spectrometer, SYNAPT G2-S HDMS System, and targeted imaging mass spectrometers.
• Thermal Analysis, Rheometry, and Calorimetry: Development of instruments like Discovery Hybrid Rheometers, Rapid Screening-Differential Scanning Calorimeter, Discovery Core Rheometer, and Battery Cycler Microcalorimeter Solution.
• Software: Advanced software-based products that interface with instruments, including waters_connect Software platform, HPLC CONNECT software, Empower Chromatography Software, OneLab Software, and TRIOS AutoPilot Software.
• Light Scattering: Integration and development of light scattering and field-flow fractionation instruments from the Wyatt Technology acquisition (e.g., DynaPro ZetaStar instrument).
• Charge Detection Mass Spectrometry (CDMS): Acquired CDMS technology assets from Megadalton Solutions, Inc. in 2022 to analyze large proteins and protein complexes for cell and gene therapies. Innovation Pipeline: Active research and development program focused on extending, complementing, and updating existing product offerings, with significant investment in new product development and enhancements. New products are being developed with recently acquired technologies, targeting both non-clinical and clinical markets.

Intellectual Property Portfolio:

• Patent Strategy: Owns a number of United States and foreign patents and has patent applications pending. Patents are viewed as valuable assets, though no single patent or group is considered essential to the business as a whole.
• Trademarks: Owns a number of trademarks, considered important to its business.
• Licensing Programs: Certain technology and software are acquired or licensed from third parties.
• IP Litigation: Material litigation related to patent settlement occurred in 2024, resulting in a $12 million litigation provision.

Technology Partnerships:

• Maintains research laboratories in Cambridge, MA and at the University of Delaware, serving as strategic, collaborative spaces to partner with academia, research, and industry to accelerate scientific advancements.

Leadership & Governance

Executive Leadership Team

Leadership Continuity: Management periodically assesses succession planning for key positions and reviews the workforce to identify high potential employees for future growth and development.

Board Composition: The Board of Directors oversees the Company’s information security risk management framework. The Audit and Finance Committee is updated on this framework annually by the CIO and reviews risk assessment and management practices.

Human Capital Strategy

Workforce Composition:

• Total Employees (as of December 31, 2024): Approximately 7,600 employees.
• Employee Trend: Decreased from 7,900 in 2023 and 8,200 in 2022.
• Geographic Distribution: Approximately 39% of employees located in the United States.
• Skill Mix: Specialized engineering and other talent are crucial for technological and product innovations.

Talent Management: Acquisition & Retention:

• Hiring Strategy: Focused on expanding the pipeline of strong candidates, including partnerships with organizations that support a culture of inclusion in hiring.
• Retention Metrics: Workforce reductions impacted approximately 2% of employees in March 2024 (primarily in China) and 5% of employees worldwide in 2023, due to aligning resources with growth and innovation strategies.
• Employee Value Proposition: Investments in various programs, digital platforms, and workshops for professional and technical skills development; Total Rewards programs.

Diversity & Development:

• Diversity Metrics: Waters Corporation has focused on expanding the pipeline of strong candidates in recruitment processes.
• Development Programs: Investment in various programs, digital platforms, and workshops that build professional and technical skills. Management assesses succession planning and identifies high potential employees for future growth.
• Culture & Engagement: Fosters a culture of inclusion through Employee Circles and Employee Hubs (voluntary, employee-driven employee resource groups). Health and safety of employees is a high priority, with online and in-person training programs.

Environmental & Social Impact

Environmental Commitments: Climate Strategy:

• Carbon Footprint Reduction: An internal sustainability working group develops robust data on carbon-producing substances to continuously reduce the Company’s carbon footprint.
• ESG Reporting: Publishes an annual ESG Report (renamed in 2022, previously sustainability report) detailing efforts to address environmental impact and uphold social responsibilities. The 2024 ESG Report was published in November 2024.

Supply Chain Sustainability:

• Responsible Sourcing: Subject to SEC rules under the Dodd-Frank Wall Street Reform and Consumer Protection Act regarding conflict minerals (tantalum, tin, gold, tungsten). Evaluating its 2024 supply chain and plans to file its 2024 Form SD in May 2025.
• Hazardous Substances: Monitors environmental, health, and safety regulations globally, particularly EU and China Restrictions on Hazardous Substances in electrical and electronic equipment and EU Waste Electrical and Electronic Equipment directives.

Social Impact Initiatives:

• Community Investment: The University of Delaware research laboratory serves as a strategic, collaborative space to partner with academia, research, and industry to accelerate scientific advancements.
• Employee Well-being: Health and safety of employees is a highest priority, fostered through online and in-person training programs.

Business Cyclicality & Seasonality

Demand Patterns:

• Seasonal Trends: Typically experiences seasonality in its orders, reflected as an increase in sales in the fourth quarter. This is a result of purchasing habits for capital goods by many customers who tend to exhaust their spending budgets by calendar year-end.
• Economic Sensitivity: Demand for products is affected by general economic conditions and the rate of economic growth in major markets. Global economic conditions, such as inflation and interest rates, can impact demand and supply.
• Industry Cycles: The pharmaceutical segment, representing 58% of 2024 net sales, is periodically subject to unfavorable market conditions and consolidations. Sales to academic and government customers are highly dependent on funding, which can vary significantly.

Planning & Forecasting: The Company's financial results are subject to changes in customer demand, which may decrease for reasons beyond its control. There is no assurance that the Company will effectively forecast customer demand and appropriately allocate research and development expenditures.

Regulatory Environment & Compliance

Regulatory Framework: Industry-Specific Regulations:

• Health and Safety: Subject to regulation by various federal, state, and foreign governments and agencies.
• FDA and Foreign Regulatory Agencies: A portion of operations are subject to regulation by the United States Food and Drug Administration and similar foreign regulatory agencies, governing product activities including design, development, labeling, manufacturing, promotion, sales, and distribution.
• Industrial Standards: Products are subject to rules of industrial standards bodies, such as the International Standards Organization, and agencies like the United States Occupational Safety and Health Administration.
• Data Privacy: Subject to varying data privacy laws and regulations related to the collection, storage, and transmission of personal data in jurisdictions including the United States, the European Union, and the United Kingdom.

Trade & Export Controls:

• Import/Export: Subject to laws and regulations governing import/export.
• Export Restrictions: Subject to export controls.
• Sanctions Compliance: Operates in many parts of the world and is subject to laws governing payments to government officials, bribery, fraud, kickbacks, and false claims (e.g., FCPA, U.K. Bribery Act).

Legal Proceedings: From time to time, the Company and its subsidiaries are involved in various lawsuits, claims, investigations, and proceedings in the ordinary course of business. In 2024, the Company recorded a $12 million litigation provision, primarily related to a patent litigation settlement. The Company believes any outcome, individually or in aggregate, will not be material to its financial position or results of operations.

Tax Strategy & Considerations

Tax Profile:

• Effective Tax Rate: 15.5% in 2024, 12.8% in 2023, and 15.5% in 2022.
• Rate Drivers (2024): Jurisdictional mix of earnings, a $5 million provision related to GILTI tax (including IRC Section 174 capitalization), and a $3 million tax benefit on stock-based compensation.
• Geographic Tax Planning: Principal manufacturing jurisdictions are the U.S. (21% statutory rate), Ireland (12.5%), the U.K. (25%), and Singapore (17%). The Company has a Development and Expansion Incentive in Singapore providing a concessionary income tax rate of 5% on certain income from April 1, 2021, through March 31, 2026. This incentive increased net income by $14 million ($0.24 per diluted share) in 2024.
• Tax Reform Impact: Effective starting in 2024, various foreign jurisdictions are implementing aspects of the Organization for Economic Co-operation and Development's Pillar Two system of global minimum tax rules. These changes did not have a material impact on the Company’s financial position, results of operations, and cash flows in 2024, and are not anticipated to have a material impact on future periods.
• Tax Audit Examinations: Subject to tax audit examinations in various jurisdictions worldwide.

Insurance & Risk Transfer

Risk Management Framework:

• Cyber Insurance: Maintains network security and cyber liability insurance to provide financial protection in case of a data breach.
• Derivative Transactions: Enters into foreign currency exchange contracts to offset market risk associated with foreign-currency-denominated sales and to hedge a portion of net worldwide intercompany receivables and payables.
• Interest Rate Swaps: Enters into interest rate swaps with an aggregate notional value of $150 million to effectively lock-in forecasted interest payments on variable rate borrowings under its Credit Facility, designated as cash flow hedges.
• Interest Rate Cross-Currency Swap Agreements: As of December 31, 2024, had three-year agreements with a notional value of $625 million to hedge variability in foreign currency exchange rates on euro-denominated and yen-denominated net asset investments. These are expected to lower net interest expense by approximately $9 million in 2025.
• Indemnification Agreements: Enters into standard indemnification agreements in the ordinary course of business, indemnifying partners/customers for intellectual property infringement claims or claims relating to property damage/personal injury from services. Historically, costs have been minimal.