Waters Aktie

Okay. We're going to go ahead and kick it off. I'm Tycho Peterson from the life science team. It's my pleasure to have Udit from Waters with us today. So welcome, Udit.

Maybe we can just start with a quick look back on 1Q. Obviously, very strong growth in the legacy Waters business. We'll start there, up double digits. Clearly, humming along in the replacement cycle. Just talk about some of the gives and takes, particularly on the biopharma side you saw in the quarter.

Firstly, thank you for having me, Tycho. It's great to be here. A fantastic quarter, double-digit growth. And we saw that this is the legacy business that you're talking about. Instruments still high single digits, LC-MS replacement cycle going very strong. New products doing extremely well, Alliance iS, TQ Absolute, XR, MRT, nice contributions from new products across the board, the idiosyncratic growth drivers with GLP-1 testing, PFAS testing, India generics, all contributing nicely.

On the recurring side, chemistry had another terrific quarter, even with the extra days, which was -- it was about 13% growth. Service grew 12%. Even if you adjust for the extra days, it's high single-digit growth. So really fantastic quarter. And I think you asked about the end markets, especially pharma. Pharma was a standout, mid-teens growth, high single-digit growth in U.S. and Europe, driven by large pharma replacing and new products. India generics doing just as well as it has over the last -- used to high teens growth in India, and that it didn't disappoint.

China was the standout. In pharma, China grew over 50%. And this is driven by the local biotech industry fueling the growth of CDMOs and the local pharma companies. And so fantastic growth, nothing to complain about. And we had virtually something for everyone in this particular quarter across the board. Equally in the guidance itself, we said, look, we're going to use the opportunity. We beat the guidance by about $60-ish million on the top line. The EPS was nice mid -- actually almost 20% growth. And there, too, we had room, but we just said, look, let's just derisk the second half of the year and use this opportunity to create a bit even more prudence in what we see as the latter of the year. So feel very good about where we sit.

And just as a last comment on where we are now, you'll remember at the Analyst Day about 1.5 years ago, we had laid out an algorithm. And we had said, look, if the industry grows between 4% and 6% on top, you add about 100 basis points of additional price versus last several years, take 100 basis points away from China being slower than it has been in the past for the industry and for us. Add the idiosyncratic growth drivers, 170 basis points, we upped that to 200 basis points in the recent times. And then we said, look, as long as the replacement cycle goes on, you should expect us to grow high single digits to high single digit plus. And that's been sort of the ZIP code we've been in for the last 1.5 years, high single digit, high single-digit plus and this time, double-digit growth.

So I feel good about what we set in motion. The operational inertia, the operational sort of tactics that need to get in place after you lay out concepts is out of the system. And so we're executing that plan, I think, really well.

Anything you're willing to say on pharma strength post 1Q? We've heard some of the peers, April and May actually has picked up for a lot of the customers -- can't do it.

We can't. Maybe you can do it. Good try.

Let's double-click on China then. Over 50% growth. It's more CDMO biotech right now than generic, right? So maybe just talk about those end markets. And then obviously we can talk on stimulus and academic?

So I think -- start with biotech. Roughly 1 in every 3 molecules that are in-licensed now out of China into the rest of the world, roughly every 1 in 3 molecules that is in-licensed in the biotech industry comes from China, right? And this is something that's been built up over a long period of time. This has not happened overnight. The Chinese government brought in a lot of talent from the U.S. and Europe into the academic institutions. They have now been funded to start their own biotech companies. The Chinese FDA has made preclinical trials much -- and early-stage clinical trials much simpler to run in China itself. So there are structural advantages of starting work for biotechs in China that is, of course, now supported by world-class CDMOs like WuXi. And equally, which is most important, in my view, is you're starting to see the rise of large pharma companies akin to Pfizer and Merck with discovery-led and research-led institutions in China itself, right?

So [ Zhang Wei ] is starting to build that and a couple of other pharma companies are building their version of Pfizer, GSK, et cetera, in China. So this is not a onetime impact. I don't expect pharma to grow over 50% every year in China for us or every quarter in China for us, but it is now a secular trend, and we intend to take advantage of it.

And I want to just share one example with you. I mean we talk about onshoring and we talk about localization of portfolios and local manufacturing, but equally important is the technology development that is taking place in China now, right? So we saw one of our large CDMOs take our high-resolution mass spec. And this is the first globally, our Xevo MRT, use it for a GLP-1 in quality control. This has never happened before. We've been trying with BioAccord for the last 3 to 4 years. We have a compliance software. It is an enterprise-level software. It serves all the needs to -- enter QC. It has entered QC for some large pharma companies in the West, but at a modest level.

But this is a first for a high-resolution mass spec like Xevo MRT to enter into QC. What does that mean? That means -- and that's for a GLP-1 for one of the large GLP-1 manufacturers globally. What does that mean? That means that once these high-resolution mass specs enter QC for impurity testing in China, they will then -- the same thing will start to happen in the rest of the world. I'm super excited about that, right? And so it's not a laggard. It's not a localization of portfolio. It is a leader. China is a leader for us now in pharma.

I think you were saying last night that WuXi kind of implements the same protocol at every facility around the world?

Yes. And in fact, I mean, there was a complaint from our China head who said, I'm winning all this business with WuXi, but they're doing their production in Singapore. So the APAC region benefits, and I should get $4 million, $5 million of credit. I said, okay. That all is fine. But jokes aside, it's fantastic to work with such engineers who are actually pushing our teams to do things faster. I mean Waters speed is something that we take pride in. But I mean, even we are being pushed in China. It's fantastic. I mean it's really, really good. And it's also true not just in that space for one of the large food testing companies. We've been forever trying to crack a global contract testing organization. One of our competitors has lion's share in it. We've forever been trying to crack it even with better instruments and better workflows, we've not been able to crack it. In China, we did, right? Because there was a pull and they're willing to give new technologies that are better a chance and incumbency has some value, but not infinite value, and it's fantastic.

And then you talked about localizing workflows, manufacturing, you're doing it with flow, right, and streamlining export processes. Just talk a little bit about when that translates into orders and revenues as we think about tenders.

So -- here now you're referring to the Bioscience business, right? So unlike our Analytical Solutions business -- our Analytical Sciences business, which is legacy Waters, where we localized our full portfolio, and we're able to compete in local tenders for any customer for Bioscience, we've been restricted from doing that, right? Because we haven't localized the portfolio. And it's actually true for microbiology as well. And for those businesses, for some reason, the portfolios were not localized even to the slightest degree. So we approved that, right, when the deal closed, and we will start to see orders -- actually sales come in, in Q3 and Q4.

And you would say, well, how can you localize so fast? I mean, localization doesn't mean local production. Localization means different pieces of the value chain have to be localized to be able to compete in local tenders with the promise that you localize more over time. We have a site in Suzhou. Sometimes that is a constraint if you don't have a site itself, which is ready to actually take these workflows. We've already tech transferred them. They're going through local approvals. As I said, we move at Waters speed, only second to China speed. So it's fantastic when the two things come together. So in Q3, you should start to see orders from locally made flow cytometers and next to follow will be locally made BACTEC FXI -- FX instruments.

And maybe just rounding it out on China, how do you think about kind of normalized China growth once the export headwinds roll off?

It's a tough question, especially if you come off the back of an 18%, 20% growth quarter, right? We've still modeled mid-single digits in our guidance. But to pass the red face test, everywhere you look, especially where we are exposed and the choices we've made to be in pharma, to support the biotech industry, to support the academic institution and to support microbiology, I see no reason why it shouldn't start to traverse towards high single digits by the time of the year ends.

Maybe just stepping back and looking at BD, 1Q came in better than expected, obviously, reset numbers on the 4Q call. Maybe just level set us now. It's been a few more months since the deal closed. As we think about what's under your control, where are you most excited? Where are you seeing the most tangible benefits from some of the changes you're enacting? Is it commercial, operational?

So just take a step back, right? I mean, let's just sort of look at the full context, right? Whenever you look at a business, you want to look at the characteristics of the end market, you want to look at commercial execution and then you want to look at innovation, right? I mean those are the choices you make. From an end market perspective, Waters has always been focused on downstream regulated settings where volume is easy to understand, bill count, number of infections, number of patients that you can verify publicly, right? And so we are always looking at those sorts of segments and we want to get stronger in those sorts of segments.

And for the last 5, 6 years at incumbent Waters, we've basically been in that space. We've executed well commercially and then we've introduced new products, to go from what used to be a low single-digit grower to a high single-digit to a double-digit grower. And we are starting the same journey with the acquired businesses now, right? They are largely downstream and they're in high-volume regulated applications like microbiology, like clinical for flow cytometry. The only things that are missing are an intense focus on commercial execution. And then once you've done that, launching new products really well, right? And so those are the two things we'll enact now.

So now to answer your question specifically, I mean, think of the transformation plan and the integration in 3 phases. First is the 180-day plan. This is self-help. This was nowhere underwritten. But when you look at such a business, you say, "Okay, are you actually going to your customers often." At Waters, what we found is we were going to customers 2x as many -- 2x more -- twice as more as some of our BD colleagues were. And so we implemented a tracking mechanism in the U.S., in particular.

Second, we said, okay, that's all well and good. How strong are your funnels, right? Is it just a conversation between two people? Or do you actually know if the lab head actually has funding and if they have approval for funding to buy the instrument that they're saying they're going to buy. so the fidelity of the funnels allowed us to meet our forecast for this particular quarter. And after many quarters, these two businesses have met their forecast. And that has to do with the robustness of the tracking of the funnels.

And then we said, look, that is all well and good. Think about pricing. Are you actually able to command pricing? And what is your pricing mechanism and pricing control mechanism? It's one thing to have a high list price. It's another to have a high landed price. How are you controlling discounts? And Waters has what are called deal desks. These are people who meet twice a week, who review hundreds of different deals over a month and approve them or modify them so that we can win versus competition, right? This is a discipline that's been there at Waters. It's being now implemented in bioscience and diagnostics.

The second part of pricing was contract compliance. These are reagent rental businesses where once you agree to a price volume curve with a customer, the customer has to comply with the volume in order to get that price. And what we saw is close to 50% of the customers in the U.S. diagnostics business were not complying. They're buying lower volume, and that's a double-digit million delinquency that we are now starting to recover.

And then finally -- and this is again self-help, right? Finally, when you talked about China already, we found that the business had not localized products in China, and we were somehow our teams were handicapped versus competition. And we wanted to remove that handicap. We have already done it. And that handicap once removed, will allow us to capture market share and capture the growth that we deserve to capture. That's just the 180-day plan. That I call setting the tone, right? And that gets you -- sort of gets everybody to understand the culture that we're building.

Then you talk about the synergies on the revenue side, right? So there are tactical synergies. These are ones you can feel and touch and you know that we've executed them in the last 5 years. This is increasing service attach, instrument replacement, e-commerce, launching new products, and we have 3 fantastic new products across the businesses. In fact, we had a press release this morning on our FXI approval for microbiology in the U.S. as well. It's already approved in Europe and Japan.

Very excited about the replacement opportunity, about the placement opportunity of that new product. A7 is a high-volume flow cytometer for routine applications that will be launched in the second half of the year. And thirdly, we've launched our HPV solution, home collection kit. These are three massive launches. You're lucky to get one every 3 to 4 years. We're getting three all at the same time, so we have to launch them well. So this is for me the second bucket, which is tactical synergies. Here and now, we can all see it. They're tangible. We've just done that over the last 5 years.

And then there are the strategic synergies. Can you enter the industrial segment with microbiology? There's a market that's already ready. We have to modify our portfolio. We've already assigned a team to do it.

Can you improve your bioseparations growth from double-digit growth to even higher by having access to antibodies? We have access to world-class antibody production. So we're going to do that.

Can you take flow into QA/QC? We're starting to see benefits of cross-selling already with mass specs into drug metabolism. This is in the reverse direction.

And can you automate LC-MS? All of those are in motion. But from short to long, 180-day plan is already showing benefit. The tactical synergies will start to show benefit now in Q2 and onwards and the strategic synergies latter half of the year. So it conceptually is very clear. The accountability is very clear. Now the question is, how do you get the inertial friction out of the system so we can execute like incumbent Waters is executing.

And maybe just diving in on -- first of all, the announcement a couple of hours ago on FXI, you're pulling forward the time line. So maybe just talk about how...

Let's give credit where it's due because when I saw that, and we said, look, we've accelerated the launches. I went to the R&D head at Micro -- in our Diagnostics business and said, "Hey, how could Waters have accelerated the launch? We -- the acceleration is longer than the time from the close to now." And he said, "Look, as soon as we knew we were going to be acquired. And during integration planning, we sort of saw how you guys are operating. People said, okay, we've got to get out of the gates fast." So there is an acceleration, but I wouldn't say that it's happened under Waters' management. It has happened under that team, which is exceptional, right? It goes to show with increased focus, with increased ambition, I mean, people want to do well. And these are fantastic portfolios. As I mentioned, these are great end markets where we have privileged positions. We have a bit of self-help to execute, and then we start to address the significant unmet needs that exist in these areas.

And let's just spend a minute specifically on microbiology because I know that's been a focus and a pressure point. You just had a good first quarter there, right, up -- low double digits ex China. Just talk about where you're feeling better on microbiology, in particular.

So again, I mean go back to the framework I set up upfront, it is just looking at the market itself, the end market. Volume grows on the high end of low single digits, say, 3-ish percent. Our nearest competitor has been commanding pricing between 200 and 400 basis points. From 2019 to '24, that segment -- that end market grew 6.5%, way faster than any diversified tools company, including Waters. Waters was one of the fastest, and we didn't come close to it, right? So it is a fantastic end market. The unmet needs are very significant. I mean for a sepsis patient, it takes roughly 18 hours from the time they enter a hospital to the time they are prescribed the right antibiotic. And every hour delay increases the mortality by 5% to 10%, roughly 300,000 people in the U.S. die of sepsis every year, right?

So unmet needs are significant. Technology solutions need to be brought in. But there is need for self-help, right? I mean we -- it's a market that grows, but we've been underperforming in the market. And in Q1, we got out of the gate strong. As I mentioned, the 180-day plan starts to show impact. Microbiology as a whole grew for the full quarter roughly 5% for the stub period a bit faster than that. And if you look at -- if you take out the China impact, it's even faster, right? China was -- China declined about 15%. So ex China, it grew really rapidly, right?

So you already start to see momentum of just focusing on the business. And that said, there are two or three, as I mentioned, self-help topics. One, we had a supply challenge with our BACTEC bottles. We are still only about 80% to 85% of the utilization prior to the supply challenge. There is zero reason why we shouldn't be 100%. In fact, Brazil is at 110%. So the creative folks have actually used that supply issue to increase penetration and others have said, oh, you know what, maybe I can't supply, right? So we're pushing the team to get back to 100% or 100%-plus, right? So there's an opportunity there.

Second, we have about 12,000 or so instruments that are out there, the FXI instruments. And there is a significant replacement opportunity that are basically instruments that are over 5 years old. And there are roughly 4,000 or 5,000 that are over 10 years old. We have just launched the new version of it, FXI, which is the most automated platform in the industry. It is a closed system. It is able to use the highest number of bottles per unit in an incubator. So a new product has been introduced exactly at the time when the replacement cycle is picking up.

So the self-help pieces will allow us to get -- I mean, I don't want to sort of set the milestones too high, but there is no reason why we shouldn't be growing faster than our competitor because we have trailed them for many, many years. And our consumption on the consumables is lower. Our instruments are aged. So we should be playing catch up like we did with Waters in '21 and '22. We grew faster than the industry because we had catch-up. And so we have catch-up here for the next 1 year, 1.5 years, where microbiology should grow faster than the industry. There's only one other meaningful competitor in the space. We should be commanding better pricing. And then you can address the significant unmet needs, right? So it's a fantastic end market. I mean there's a lot of self-help to be executed there.

Maybe a similar question on the flow side. So research clinical grew 7% in the first quarter. Just unpack what you're seeing by end market, consumables versus instruments. And where do we sit on revenue synergies and starting to kind of push it into QC bioanalytical characterization.

Sure. So let's start with the overall business. So half of it is clinical customers, half of it is what we call research and pharma customers. On the clinical side, the reagents business itself grew 6% for the full quarter. And not just for the stub period. For the stub period, it was much faster, right? I just take the full quarter. And for the full quarter, it was 6%. And that business in itself, our highest margin business across the new Waters is our clinical reagents business from Bioscience. And that's been growing slower than some of our other businesses. So their task is to grow that business faster.

And as I mentioned earlier, there is an issue with contract compliance. And we just reviewed Europe 2 days ago, where the European team has done the same analysis we did with the clinical business in the U.S., and they've also found delinquency in contract compliance on reagent rentals. Now they're going back and trying to figure out the value propositions that we need to offer customers to increase compliance, so you should see that business growing faster. Fantastic business.

The second is the research reagents business, which is also a very good business. There's another competitor here who's now also been public about how they focus on quality and orders and then finally on pricing. So it's a -- the market structure there is also very good. There's only one other meaningful competitor in that space. Our challenge has not been the quality of our products. Our challenge has been on delivery. And there, we're doing two things. One, we're basically improving the front end, which is what we did with Waters to improve the e-commerce platform. And there, we've hired about 100 new people in our Global Capability Center in Bangalore to expedite that process. And finally, the third piece is delivery, which you can't fix overnight. And usually, customers expect 24 -- between 2 hours and 24 hours. If you're in China, they expect their antibodies in 2 hours. If you're outside of China, they will accept 24 hours delivery time for research antibodies. And to get to that point, you need to have your distribution network be global. You can't do that overnight.

So we're going to partner with distributors who have global infrastructures, have them hold inventory for us and then partner with them to improve the demand and delivery. So that's the reagent side, really clear plans to expedite growth. And then on the instrument side, the A7 product, as I mentioned earlier, it's a high-volume use flow cytometer -- a spectral flow cytometer that's being launched in the second half of the year, actually June, July time frame. At [ CYTO ], we'll talk about it more next week. So really excited about that. So on all three fronts, we see, the base business growing faster beyond the 180-day plan as well.

Now you asked about synergies on flow in QA/QC or other synergies with Bioscience. The Bioscience business has already helped us penetrate drug metabolism accounts. We saw roughly $5 million of upside for our analytical business coming from Bioscience accounts. Now equally, on the other side, taking flow cytometry into QA/QC, first, it starts with process development, where our analytical business has a much larger presence, and we're starting to see that sort of the seeds of that being soon.

For it to enter QC, we will have to have flow cytometry be compatible with Empower, that's going to take a little bit longer, 1 to 2 years development time and then you'll start to see the penetration like we did with light scattering, right? So I think that's how I would break it up.

You touched on pricing a couple of times. Just maybe talk a little bit about when we could really start to see this show up in the P&L. I know you've implemented some deal desk...

I mean we've incorporated 50 basis points in the guide. You should see something better than that. It's -- over the long term, we've -- with Waters had roughly 200 basis points of pricing over the last few years. At the Investor Day, we said, look, 100 basis points above the 50 basis points that we've seen historically. So for the new businesses also, you should have the same expectation. 50 basis points is what's been there historically, which is what is in the guide. There's no reason why in 1.5 years from now, you shouldn't be seeing 150 basis points or 200 basis points, which is what we said also in the investor call.

And then just thinking about chemistry on the base business. Talk about what you're seeing and durability above the historical trends there, call it 8% to 9% versus traditional 7%. I think given pricing is sort of unchanged at 5%, it suggests 1% to 2% from new markets, new products. Just talk a little bit about...

And I think you nailed it. I mean the simplest way to -- so first answer your question, the simplest way to think about it is, historically, chemistry has grown 7%. With our bioseparations growth and our products there, you should expect 150 to 200 basis points of faster growth just coming from those, right? So that's the simplest way to think about it, assuming similar pricing.

Now you take a step back, and I think it's instructive to look at the journey about 5-ish years ago, we decided that we're going to spend bulk of our R&D spend in chemistry on bioseparations. So over 70% of R&D spend went towards bioseparations. And step by step, we started to build the portfolio. And last year alone, we launched 12 new products on the back of our MaxPeak Premier column, right? It takes 4, 5 years to sort of build these portfolios and start to see the benefit. And with MaxPeak, the insight was very simple. Large biologics basically get stuck to surfaces. And we said, how do you build an inert surface without having it leach off. We built that with MaxPeak. And then on top of it, we started to sort of come up with better particles, better surface chemistry that would be compatible with the biology of these complex molecules.

Our nearest competitor launched their inert column 5 years later. So we have the market to ourselves for roughly, if I think of it this way, right? So each of these new modalities now that are being separated with our columns has that 4- to 5-year window. And then once they get spec-ed in, they are sort of for the long term, going to grow like bioprocessing does high single digit, double digits. So we are now in a zone where you will see us grow way faster in one quarter, a little bit slower because we are specking into discovery a lot of our columns. So you'll see a spike and then you might see a bit of a slowdown. But over the steady state, you should see a high single-digit growth, right?

And as you think of the balance of the year, we've said, look, it's going to be mid-single digits. Q2, in particular, remember, we had a $10 million pull forward in China in Q2 last year, and that sort of is a headwind that one has to surmount. So that's why we've said chemistry, think of it as a 4-ish percent grower in Q2, maybe a bit higher, maybe a bit lower. But add the $10 million, that's another 6% of growth. That also gets you into the high single-digit, double-digit domain, right? So no matter how you look at it, we're traversing in at least the high single-digit domain for a while in chemistry.

And just part of the excitement around the deal is getting access to the antibody library. When should we think about stranded products -- projects on the BD side start to shake loose?

So two parts to that answer. First, existing antibodies, we looked at the existing library of antibodies. And out of the 12 programs that were stranded, 8 have been kicked off already, right? So we found antibodies that existed that the team is already manufacturing that we have substituted external vendors for our internal capabilities already, right? And it takes, give or take 6 to 12 months to basically do the conjugation, do the experiments, work with the customer to start to see if they're interested in embedding that into their workflows. But 6 to 12 months from the time you start, you start to see first impact, you probably launch the product in 2 years, right? So that's sort of the time frame for these 8 antibodies.

Then there are the additional 4 that we said we need to build sort of develop those antibodies internally, and we're doing something slightly more than that now. We're now looking at our global infrastructure and saying, hey, given that we produce antibodies, should we not think about expanding our library of antibodies and supply them for use in other areas as well, right? So you can already see a hint towards building an antibody business, and why not, right? I mean there is a plan that's ready to build an antibody facility in Singapore. We've sort of nixed it and we said, no, let's look at our internal capabilities in every geography. And can we take -- can we build a brownfield approach. So we're looking -- we're examining that. So they're a two-pronged approach: One, support our bioseparations business; and two, can we expand our antibody production capabilities to have a library of antibodies available for our customers and not just be a producer of flow antibodies.

Great. Just got a few seconds left. I guess, maybe just coming out of ASMS any message you want to take away? Obviously, new introduction here, maybe slowly moving into kind of high-res.

I think incredibly proud of the team that's leading mass spec. I mean it's gone from a team that was obsessed with high-resolution mass spec 6 years ago to one that builds strength in high-volume tandem quads with TQ absolute, TQ Absolute XR, then equally had Skunk Works projects behind the scenes to improve our high-resolution offering with the Xevo MRT and now a benchtop Xevo MRT, which is the fastest high-resolution instrument on benchtop available today in the industry equally improving cyclic, and this is where your question is going to start moving into proteomics, make no mistake. I mean that's an area that's attractive. We just felt 5, 6 years ago, we were in no position to build while we were losing in our home base, which was high-volume mass spec. So we're winning in our home base now. We're attacking drug metabolism as well. We feel we have a right to win there. And yes, the answer to your question is yes. We are interested in proteomics, and we are working on ways of making a difference and stay tuned.

Great. We'll leave [Audio Gap]

Good morning. Welcome to the Waters Corporation First Quarter 2026 Financial Results Conference Call. [Operator Instructions] This call is being recorded. If anyone has objections, please disconnect at this time.

It is now my pleasure to turn the call over to Mr. Caspar Tudor, Head of Investor Relations. Please go ahead, sir.

Thank you, Lila, and good morning, everyone. Welcome to Waters Corporation's First Quarter Earnings Call. Joining me today are Dr. Udit Batra, our President and Chief Executive Officer; and Amol Chaubal, our Senior Vice President and Chief Financial Officer.

Before we begin, I will cover the cautionary language. In this conference call, we will make various forward-looking statements regarding future events or future financial performance of the company, including the financial and operational impact of Waters combination with the Biosciences and Diagnostic Solutions business of Becton, Dickinson and Company or BD. We will provide guidance regarding possible future results, as well as commentary on potential market and business Waters Corporation over the second quarter of 2026 and full year 2026. These statements are only our present expectations and are subject to risks and uncertainties. Please see the risk factors included within our Form 10-K, our Form 10-Qs, our other SEC filings and the cautionary language included in this morning's earnings release.

During today's call, we will refer to certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP measures are attached to our earnings release or in the appendix of the slide presentation accompanying today's call. Unless stated otherwise, all organic revenue growth rates are presented on a constant currency basis and are in comparison to the first quarter of 2025. For acquired company revenue, unless stated otherwise, all results cover our period of ownership from the transaction closing date on February 9, 2026, through to the end of the quarter for acquired company revenue growth rates, unless stated otherwise, all growth rates are presented on an estimated as-reported basis, covering the period of ownership in comparison to the prior year equivalent period that predates Water's ownership. Finally, we do not intend to update our guidance, predictions or projections, except as part of a regularly scheduled earnings release. or as otherwise required by law. On today's call, Godet will begin with our key messages and business highlights. Amol will then review our financial results and outlook. After that, we will open up the lines for questions.

I'll now turn the call over to Udit.

Thank you, Caspar, and good morning, everyone. We delivered an excellent first quarter as a combined company, marking the start of a new powerful era of growth across our 4 divisions. We achieved double-digit organic growth in our legacy businesses, delivered meaningfully better-than-expected revenue for our newly acquired businesses and grew adjusted earnings per share by 20%. We also took decisive steps towards building our new platform for sustained long-term growth, driving strong momentum and underpinning our raised full year growth outlook.

Before turning to the numbers, I want to recognize our teams for delivering this strong start to the year. They are enacting immediate operational improvements, continuing to deliver pioneering innovation and collaborating effectively to deliver revenue synergies already, all while ensuring a smooth transition from BD. It is a true privilege to work with my colleagues, and I'm proud of what they have accomplished.

In the first quarter, total company as reported revenue was $1.267 billion, comprising of $747 million of organic revenue and $520 million of Biosciences and Diagnostic Solutions following February 9 acquisition closing date. Organic revenue grew 13% as reported and 11% in constant currency, exceeding the high end of our constant currency guidance range by approximately 200 basis points. Orders again, outpaced sales. Biosciences and Diagnostic Solutions revenue exceeded guidance by $40 million and grew an estimated 7% on a reported basis versus the prior year equivalent period, a strong opening performance for these businesses under Waters' leadership.

On a full quarter pro forma basis, comparable revenue growth also exceeded expectations and improved meaningfully relative to fourth quarter trends. Execution initiatives launched at the close -- at closing drove flat year-over-year reported growth despite a $20 million headwind in respiratory testing due to the weak flu season. Excluding these impacts, growth was approximately 3% for the full quarter. With our strong top line performance, combined with disciplined cost management and operational excellence across the organization, adjusted EPS grew 20% year-over-year to $2.70 per share, exceeding the high end of our guidance range by $0.35.

Let me now cover these drivers of strength in more detail. Beginning with our organic revenue performance. The Analytical Sciences division grew 12% in constant currency, with instruments up 8%, chemistry up 13% and service up 14%. In pharma, we grew mid-teens with sustained above-market performance supported by our unique exposure to idiosyncratic growth drivers, continued strong instrument replacement and excellent adoption of new products in our high-growth adjacencies. In academic and government, we grew high teens, driven by strength in Europe and broad-based demand for our revitalized high-resolution mass spec portfolio. In industrial, we grew low single digits, led by chemical analysis and continued momentum in PFAS testing applications. Thanks to the effective cross-divisional collaboration, given our diligent integration planning, approximately 1 percentage point of analytical sciences growth was driven by tandem quadrupole mass spectrometry sales through the Biosciences channel and early proof of revenue synergy realization.

Within the Advanced Diagnostics division, the clinical business unit previously reported within the Waters division grew 14% despite DRG weakness in China. Strength was led by double-digit growth in the Americas and Europe. The Material Sciences division grew low single digits, reflecting solid performance across core industrial and high-growth applications given present macro conditions. Turning now to our newly acquired businesses. The Biosciences division delivered $230 million of revenue, representing 7% estimated growth on an as-reported basis from the closing date of the transaction to the end of the quarter. Flow research and Flow clinical, both grew 7%, Reflecting improved execution and increased commercial activity. Reagents grew low double digits, while instruments remain pressured due to U.S. academic and government trends, and ongoing China-related constraints, including export restrictions of high-parameter products and lack of a localized product portfolio. Meanwhile, overall demand for our recently launched FACSDiscover A8 and S8 systems remained strong.

On a full quarter pro forma basis, Biosciences declined 1%, marking a significant improvement from the 10% decline in the fourth quarter of 2025. This inflection is further underscored by our ex-China growth which was 4% for the full quarter. As we localize the China portfolio in the second half of this year, launch additional new products and implement incremental new commercial actions as the year progresses, the business is poised for further acceleration throughout 2026. Within the Advanced Diagnostics division, Diagnostic Solutions delivered $288 million of revenue, representing 8% estimated growth on an as-reported basis from the close date. Microbiology grew 10% and reflecting improved commercial momentum tied to the newly enacted KPI discipline ahead of our BACTEC FXI launch in blood culture. On a full quarter pro forma basis, Diagnostic Solutions business grew 1%, a clear acceleration from high single-digit decline in the fourth quarter of 2025. Excluding respiratory testing headwinds, growth was 6% for the full quarter, reaching mid-single-digit underlying growth sooner than expected.

At the divisional level, including the clinical business unit, Advanced Diagnostics grew 3%. Excluding these same respiratory headwinds, the Advanced Diagnostics division grew 7.5% for the full quarter pro forma basis, reflecting strong underlying momentum. This inflection was delivered even ahead of the full benefit of our commercial execution initiatives and new product launches and despite a 2% China DRG-related headwind that will annualize into the baseline in the second half of the year, positioning the business for continued acceleration as we enter the back half of the year. Less than 90 days post close, we have already made notable progress after taking control of the Biosciences and Diagnostic Solutions businesses as is evident in our results. Immediately after the February 9 closing date, we launched a 180-day plan to reinvigorate growth centered on a focused set of rapid execution initiatives. Early results have been outstanding, driving a clear and meaningful step in revenue -- a step-up in revenue performance relative to the pre-closed performance trends.

Our first priority was to instill focus, accountability and urgency across our newly acquired businesses. We have since substantially increased the frequency and rigor of forecast and funnel reviews, with deeper inspection of conversion rates, deal progression and pipeline quality. This has driven greater visibility and transparency, faster decision-making and improved commercial execution. In parallel, we have taken deliberate actions to increase commercial activity across the organization. We have raised expectations around customer engagement, driving our sales team to spend more time in the field, getting in front of the customers and increasing outbound activity. This has been reinforced with clear KPIs and daily management, resulting in meaningful increases in call volume customer visits and pipeline generation, which is driving stronger funnel trends and overall commercial momentum.

Our second near-term priority under our 180-day plan is pricing discipline. We have deployed our experienced Waters pricing team across Biosciences and Diagnostic Solutions where we have conducted a comprehensive pricing review and are establishing 2 new deal desks. We are already seeing tangible results with pricing actions taken right away in the quarter, already beginning to augment revenue performance. In addition, we are actively reviewing reagent rental contracts and utilization data to identify commercial opportunities. Within U.S. Diagnostic Solutions alone, our initial review of 1,600 contracts has identified approximately 700 that are currently out of compliance, representing a double-digit million shortfall annually. We see meaningful opportunity to improve operational follow-through on these contracts in the quarters ahead.

Our third near-term priority is to regain share in Flow research. We have already approved and initiated actions to localize manufacturing of Flow instruments in China to improve market access and reduce export complexity, addressing a key source of share loss. We intend to begin manufacturing key products in China for China, starting in the third quarter, which is already providing our team a strong impetus to begin competing for tenders that require local manufacturing. We're applying the same playbook that has made our analytical sciences business a growth leader in China. For Flow research reagents, we're improving product availability and speed to customer by adjusting our distribution strategy, leveraging new channels and mobilizing Waters' existing distribution network. These actions are expected to begin resolving prior constraints that have impacted share beginning in the second half of this year.

We remain the market leader in downstream high-volume life science applications, spanning LCMS, light scattering and precision chemistry workflows together with related service and informatics. In the first quarter, we launched our next-generation Microflow LC Chemistry Columns with MaxPeak Premier technology, delivering up to twice the sensitivity of traditional microflow columns for used in high-throughput bioseparations, DMPK and OMEX applications. In light scattering, we also recently launched our omniDAWN Multi Angle Light Scattering Detector, which is an industry first extended range detector for use in UPLC and meeting the rising throughput and resolution requirements of our customers. These new product launches increased our degree of differentiation when serving large molecule applications in our attractive end markets.

In microbiology, we recently announced that our next-generation blood culture system, the BACTEC FXI, has received CE marking under the European Union's In Vitro Diagnostic regulation, representing a key milestone in our microbiology product road map and delivered ahead of schedule. BACTEC FXI is a groundbreaking new product that combines industry-leading automation, allows 60 sample loading and offers a 3-hour faster detection time than the current generation BACTEC, which was launched over a decade ago. This system is now available in Europe and Japan, and we're pursuing additional regulatory approvals in other key global markets in the months ahead. In molecular, we recently received FDA clearance for our BD Onclarity HPV self-collection kit and BD Onclarity HPV assay, enabling at-home cervical cancer screening with extended genotyping for multiple high-risk strains. This solution allows patients to collect their own sample at home, which is then analyzed in the lab using the BD Onclarity HPV assay, removing barriers to the screening access.

Cervical cancer is highly preventable, yet remains significantly underscreened. Nearly 1 in 4 women in the U.S. is not up to date with cervical cancer screening despite HPV being the primary cause of nearly all cervical cancers. Screening gaps persist due to access challenges, discomfort and patient avoidance of pelvic exams, self-collection directly addresses these challenges by offering a less invasive and more convenient alternative with a proven ability to increase screening participation. As the most comprehensive at-home cervical cancer screening tool available, we are empowered by a mission to remove these barriers that prevent individuals from receiving routine screening. Our goals are aligned directly with the priorities established by the U.S. Department of Health and Human Services, which identified expanding at-home testing as a top public health priority last year. We have already begun to sign contracts with strategic partners as we bring this solution to market.

Now turning to the synergies. On cost synergies, we remain firmly on track to deliver our $55 million target for 2026 driven by organizational optimization, procurement savings and network optimization with a clear line of sight to deliver. Since February 9, we have moved quickly to enact our restructuring plan and are now in advanced stages of implementation. We expect these actions to improve cost efficiency by optimizing spans and layers, eliminating redundancy and achieving a leaner centralized cost structure as part of the integration. The associated savings will hit the P&L beginning in the third quarter of this year.

We've also activated our centralized spend control tower, increasing visibility into indirect spend and driving more disciplined procurement execution. These actions are enabling us to capture savings across key categories while improving control and accountability. At the same time, we're also taking business level cost actions, separate from our synergy program and rightsizing costs in areas where there is clear opportunity to realign with the revenue base. together with our growth outlook, these actions support solid margin progression in the second half of the year. On revenue synergies, as I mentioned earlier, we're already ahead of plan. We have moved quickly to activate cross-selling across the combined commercial organization, leveraging the Biosciences channel to drive incremental demand for mass spec in pharma clinical settings. We expect further contribution as we continually scale these efforts throughout the year. As we progress through 2026, additional synergy levers will start to build across instrument replacement, service plan attachment and e-commerce. In total, we remain well on track to deliver $50 million of expected revenue synergies this year.

On instrument replacement of the 22,000 ripe for replacement, 12,000 are BACTEC, with over 50% greater than 5 years old and over 25% greater than 10 years old. Since February 9, we have accelerated the U.S. and European launch of BACTEC FXI by 3 to 5 months relative to the inherited business case, creating earlier revenue capture across the significant installed base opportunity. On service plan attachment, we have completed the first ever full coverage analysis of low microbiology and molecular diagnostics installed basis. Beginning this quarter, we are assigning these opportunities to account-level representatives supported by clear KPIs and our water service leadership team. an effort, we expect to drive at least $20 million of incremental revenue over the next 5 years. On e-commerce, we have scaled our digital capabilities team in recent weeks. We now have more than 100 full-time employees in our e-commerce team at our global capability center in Bangalore. This investment is a key enabler of a future best-in-class e-commerce platform, strengthening our competitive position and driving increased customer adoption of digital ordering channels, which is a key synergy.

Turning now to 2026 guidance and our value creation road map. We have begun 2026 with significant momentum, driven by the instrument replacement cycle, idiosyncratic dose drivers and accretion from our high-growth adjacencies. As a result, we are raising our full year 2026 organic constant currency revenue guidance to 6.5% to 8%, reflecting our strong first quarter performance and embedding $15 million of expected revenue synergies from cross-selling of mass spec. For the acquired businesses, we now expect Biosciences and Diagnostic Solutions to generate approximately $3.035 billion of reported revenue in 2026, which includes $35 million of expected revenue synergy contribution tied to the vectors I just covered, including instrument replacement, service plan attachment and e-commerce. Together, total 2026 reported revenue is expected to be approximately $6.405 billion to $6.455 billion based on latest FX rates.

Turning now to EPS. Given our strong first quarter results, updated FX assumptions and the prudence embedded in our second half outlook, we are raising our full year adjusted EPS guidance by $0.10 to $14.40 per share to $14.60 per share, reflecting growth of 10% to 11%. With our synergy levers now underway, we have an excellent platform for continued strong performance as a new powerful era of growth begins, unfolding in 3 phases over our midterm outlook. In Phase I, where we are today, the incremental performance at our acquired businesses is tied to immediate operational improvements, such as those outlined in our 180-day plan, together with early revenue synergies from cross-selling. The strong Q1 results give us confidence that this foundation is being built at speed. In Phase II, these operational improvements are then joined by our full first tranche of revenue synergy levers, spanning instrument replacement, service plan attachment and e-commerce. These are near-term well-defined opportunities that are expected to begin contributing starting in the third quarter of this year.

In Phase III, the strategic power of this combination becomes most visible. New product launches and bioseparations taking flow into QC in bioanalytical characterization and our new platform launches such as rapid stability testing are expected to add further incremental growth vectors as we increasingly leverage our joint capabilities. Each of these spaces takes us further up the growth curve from the mid-single-digit pro forma growth rate where our full year guidance sits today, progressively upwards into the high single digits over the next several years. This is very similar to what we have seen at our legacy Waters business over the last 5 years. At the same time, we expect to drive significant margin expansion augmented by our cost synergies and expect to achieve at least 100 basis points of adjusted operating margin expansion every year through the end of the decade.

Together, this powerful equation yields a mid-teens adjusted EPS growth algorithm and one we are executing against with increased confidence. In summary, we are laser-focused on delivering value through our execution and operational improvements, innovation launch excellence and synergy realization. With this transformation already underway, this value creation journey is beginning now and we are doing so at speed.

With that, I will now turn the call over to Amol to cover our financial results and guidance in more detail.

Thank you, Udit, and good morning, everyone. In the first quarter of 2026, we continue to deliver industry-leading growth. We delivered reported revenue of $1.267 billion, which was ahead of expectations. Momentum remained strong at Waters organically, and our newly acquired businesses delivered a strong start as our 180-day growth revitalization plan began to take hold.

Organic revenue was $747 million, growing 13% as reported and 11% in constant currency, which was 200 basis points above the high end of our guidance range. Our newly acquired businesses delivered $520 million of revenue during our period of ownership, $40 million of our guidance and representing 7% estimated as-reported growth versus the comparable prior year [ stop period ]. Importantly, performance was ahead of expectations on a full quarter pro forma basis as well. As reported growth for the full quarter was flat improving notably versus the prior quarter and underscoring the strength of our execution and growth revitalization initiatives. Excluding $20 million of respiratory testing headwind, growth was 3% for the full quarter.

By geography, as reported, revenue was $505 million in the Americas, $412 million in Europe and $350 million in Asia. We effectively managed our supply chain and mitigated elevated freight costs, tariff costs and inflationary pressures while continuing to invest for the long term. Total company adjusted gross margin was 54.7%, approximately 200 basis points better than expected. Adjusted operating margin was 23.6%, also approximately 200 basis points better than expected. This reflects strong margin results in a dynamic macro environment and one achieved before the benefits of our cost synergies and broader cost actions start to flow through the P&L. Our operating tax rate came in at 15.6% and net interest expense was $38 million.

With our top line strength, disciplined cost management and operational excellence, adjusted EPS grew 20% to $2.70. On a GAAP basis, we reported a diluted loss per share of $0.87, reflecting acquisition-related purchase accounting charges, including amortization of acquired intangibles and inventory step-up as is typical following a transaction of this scale. Free cash flow for the quarter was $42 million outlay impacted by deal-related transaction costs and the timing of net cash settlement with BD.

Turning to our results by operating segments. The Analytical Sciences division, which is our legacy waters division, excluding the clinical business unit, delivered as reported revenue of $607 million, up 14% as reported and 12% in constant currency. In constant currency, instruments grew 8%, chemistry grew 13% and service grew 14%. Instrument strength was broad-based across both LC and MS driven by robust replacement activity and our idiosyncratic growth drivers across GLP-1s, PFAS, India generics and biologics. Leveraging the Biosciences sales channel, we also achieved strong mass-spec results in pharma clinical settings, as Udit outlined. Chemistry growth was again led by MaxPeak Premier and new products within bioseparations which have been a vertical success. Our service results reflect strong pull-through from recent expansion in service plan attachment levels.

By end market, pharma grew 14%, non-pharma grew 8% as academic and government grew 18% and industrial grew 3%. Within Pharma, spending trends remain strong across ethical pharma, CDMOs and Chinese biotech. Growth was broad-based with high single-digit growth in Americas and Europe. Asia grew nearly 30%, led by over 50% growth in China, low teens growth in India and low teens growth in Japan. Within academic and government, growth was driven by strong spending trends in Europe and solid demand globally for our revitalized high-resolution mass spectrometry portfolio, including Xevo MRT and Xevo CDMS. In China, we continued strong capture of stimulus standard opportunities. Within Industrial, Asia grew mid-single digits, Europe grew low single digits and the Americas was flat. Growth was led by chemical analysis and PFAS applications. For PFAS, we sustained strong growth despite a tough prior year comparison led by double-digit growth in both Europe and China.

The Biosciences division, which represents the former BD Biosciences business delivered as reported revenue of $232 million, representing 7% estimated as-reported growth from the closing date to the end of the quarter versus the comparable prior year [ stopped period ]. Reagents grew low double digits while instruments remain pressured due to U.S. academic and government trends and China-related constraints such as lack of localized product portfolio. Overall, Flow Research grew 7% and Flow Clinical grew 7% with stronger commercial execution driving increased activity levels across both business areas. Within Flow Research, performance was led by reagents and strength in our FACSDiscover A8 and S8 instruments, particularly in Europe. Within Flow Clinical, ex-China grew 13% while China declined 25% due to DRG headwinds. By geography, Europe grew over 30%, the Americas grew 10% and Asia declined high teens, led by China.

On a full quarter pro forma basis, Biosciences declined 1%, representing significant sequential improvement versus the fourth quarter trend tied to our commercial actions. On an ex China basis, Biosciences growth for the full quarter was 4%. The Advanced Diagnostics division comprises of the former BD Diagnostic Solutions business, and the mass spec Diagnostics clinical business unit previously reported within Waters division. Total as reported revenue for the division was $349 million. Diagnostic Solutions delivered $288 million of as reported revenue, representing 8% estimated underlying growth from the transaction closing date to the end of the quarter. The clinical business unit delivered $61 million of revenue, up 16% as reported and 14% in constant currency.

On an as-reported basis, microbiology revenue was $203 million, reflecting 10% underlying growth for the own period, driven by improved commercial momentum as our execution initiatives began to take hold. Ex China grew low double digits, while China declined 12% due to DRG headwinds, which was better than expected. Molecular Diagnostics and Point of Care revenue was $84 million, reflecting 2% underlying growth for the owned period. On a full quarter pro forma basis at the divisional level, advanced diagnostics grew 3%, which includes a 4.5% headwind from respiratory and a 2% headwind from China. The acquired Diagnostic Solutions business grew 1%, reflecting a significant improvement in growth versus fourth quarter trends. Growth for the full quarter was driven by microbiology, which grew 5% led by high single-digit ex China growth.

Excluding the same respiratory headwind, Diagnostic Solutions grew 6%, setting us up well for the rest of the year as these headwinds are not expected to recur. The Material Sciences division delivered as reported revenue of $79 million in the quarter, representing an increase of 6% as reported and 2% in constant currency. Growth was led by strength in high-growth segments such as batteries and electronics testing as well as aerospace, and we saw continued momentum in electric vehicles and data center applications. However, this was partially offset by soft trends in core industrial applications such as chemicals and materials.

Now I will share further commentary on our full year outlook and provide our second quarter guidance. Beginning with organic revenue, we have entered 2026 with significant momentum, driven by instrument replacement cycle, our idiosyncratic growth drivers and accretion from our high-growth adjacencies. We are raising our full year 2026 organic constant currency revenue growth guidance to the range of 6.5% to 8%, reflecting our strong first quarter performance and embedding $15 million of expected revenue synergy contribution. We now expect foreign exchange translation to have neutral effect on organic sales, which translates to organic reported revenue of $3.37 billion to $3.42 billion in 2026.

Turning to our acquired businesses. We now expect Biosciences and Diagnostic Solutions businesses to generate approximately $3.035 billion of revenue in 2026, which includes $35 million of expected revenue synergies. Together, total reported 2026 revenue is expected to be approximately $6.405 billion to $6.455 billion based on latest FX rates. The restructuring actions tied to our cost synergies are taking place towards the end of the second quarter, together with business level cost realignment. This supports solid margin progression in the second half of the year. In addition, we have a range of operational initiatives in place to fully offset anticipated impact of elevated freight, raw materials and component costs due to ongoing conflict in the Middle East for the balance of the year.

Together with our strong first quarter results, we now expect our full year adjusted EBIT margin to be 28.2% in 2026. Below the line, net interest expense is now expected to be approximately $186 million. Given diligent work by our tax team, our full year tax rate is now expected to be approximately 16%, which we expect to persist in future years. This translates to a full year 2026 adjusted earnings per fully diluted share of $14.40 to $14.60, which is a $0.10 raise in our guidance range, reflecting our strong first quarter results, partially offset by incremental prudence embedded in our second half assumptions and updated FX rates. For the second quarter of 2026, we expect organic constant currency revenue growth of 6% to 8%. Foreign exchange represents a headwind of approximately 0.5% at current rates, resulting in organic reported revenue guidance of $814 million to $829 million. We expect revenues from the Biosciences and Diagnostic Solutions businesses to be approximately $802 million in the second quarter of 2026, which represents approximately 2.5% of reported growth.

Together, these results in our total reported second quarter 2026 revenue of $1.616 billion to $1.631 billion. Second quarter adjusted earnings per fully diluted share is expected to be in the range $2.95 to $3.05, which is flat to 3.4% growth given the full burden of higher interest costs and newly issued shares and ahead of cost synergies and business level cost action benefits that begin to flow through the P&L starting in the third quarter.

Turning to our implied guidance assumptions for the second half of the year. Even with the full year raise in organic growth guidance, our strong first quarter results and the second quarter guided midpoint of 7% implies a prudent 6% organic constant currency growth in the second half of the year. This is deliberately lower than what was implied in our prior guidance as it further derisks our back half organic growth outlook. For the Biosciences and Diagnostic Solutions, our strong first quarter performance and second quarter guidance also meaningfully derisks our implied second half outlook. Our second half assumptions reflect a prudent growth rate of 1.5 percentage points above our second quarter guidance, well supported by incremental commercial and operational actions already underway and a favorable prior year comparison.

With that, I will now hand it back to Caspar.

Thanks, Amol. That concludes our prepared remarks. We are now happy to open the lines and take your questions.

[Operator Instructions] Our first question will come from Tycho Peterson with Jefferies.

Maybe just starting with the guide here, a number of moving pieces. Obviously, the $40 million beat on the BD side, you've got headwind you called out. So it looks like the base business is getting better by about $5 million on an organic basis. The $35 million in revenue synergies, though, can you maybe just touch on where you think those are coming from earlier? I know you gave a little bit of color, Udit. And then what's captured on pricing? I know you kind of flagged that as maybe showing up a little bit earlier.

Yes. I mean, look, on the revenue synergies, the first phase of revenue synergies is around things such as instrument replacement, service plan attachment and e-commerce and that's what is embedded in that $35 million outlook. What's not embedded in that guide is the pricing actions that we are taking. What's not embedded in that guide is also how we've successfully neutralize the impact of tariffs on our legacy Waters business. And what's not embedded in that guide is the benefits of being more disciplined on our reagent rental contracts.

Yes. So Tycho, just building on that, I think that the revenue synergies that Amol outlined, the 3 levers we've talked about in the past. But what's really new is the 180-day plan, right? I mean we basically work diligently to look at how we were doing funnel reviews, how -- what the activity was in the field. In fact, in some cases, the weekly call rates have actually doubled, right, and especially in the U.S. Advanced Diagnostics business. We've also implemented pricing improvements and with our deal desk both in bioscience and diagnostics. And we're looking at reagent rental contracts across the Diagnostic Solutions business. And having looked at roughly 1,700 or so accounts, close to half of them are out of compliance, and that's a double-digit opportunity. So these will start to now play out in the -- in starting Q2.

And then finally, we are localizing our portfolio in China, really using the same playbook that we did for the Analytical Solutions business, which has incredible growth this quarter, right? So really following that labor. What's not really incorporated is the 180-day plan, which is having quite an early impact.

Okay. And then for the follow-up, Udit, can you talk about biology. Obviously, there was a comp factor there, but 10% growth is notable, up low double digit ex China. Just talk about your confidence in turning that business around, obviously, the new BACTEC coming fairly soon. So yes, maybe just talk about your confidence in recovery there.

So Tycho, maybe first, just some contextual comments, right? Take a step back, I mean, Waters is focused on high volume regulated applications, right? That's what we've done throughout our existence. We take sort of lean brands and then with smart commercial execution, really meaningful new products, deliver what we are seeing as industry-leading growth for our Analytical Sciences business, both growth and margins, right? And we intend to do the same with microbiology, where the unmet needs are very significant and we've gotten off to a fantastic start.

Microbiology has the same characteristics, high-volume regulated applications with significant unmet needs. Really great start, about 5% to 6% growth in spite of the DRG headwinds. And as you go into the back half of the year, the baseline becomes easier and the FXI launch, we're very excited about that should augment not just the revenue synergies from instrument replacement, but the underlying business itself. So really exciting times and significant unmet needs that excites our team. So expect to see that business nicely.

Your next question will come from Patrick Donnelly with Citi.

Udit, maybe one on the core kind of legacy Waters instrumentation side. It seems like LCMS, you had a pretty nice quarter. I know you called out pharma. And then it seemed like [indiscernible] actually improved a little bit. Can you just give a little more color on what you saw how the biopharma conversations trended in the quarter? And then as well, just ack ago, what you're seeing there?

Yes. So sure, Patrick. Look, first on instruments overall, LCMS was high single digits, yet again. The replacement cycle is still underway, contributing nicely, especially in the U.S. and in Europe. It's augmented by the new products, Alliance iS and now the Xevo MRT having a wonderful start and chemistry doing a great job there as well and the idiosyncratic growth drivers, right? You see GLP-1 testing focus on biologics, India generics, all contributing to the instrument growth rate.

Now to your question on pharma itself, I mean, really pleased with what we see, right, to what I said to Tycho as well for a downstream high-volume regulated player, right? And we've seen terrific trends there. We brought new products into that space. We're seeing mid-teens growth overall, high single digits in Americas and in Europe, where ethical pharma is leading the charge with instrument replacement. In China, we saw over 50% growth driven by biotech CDMOs and emerging innovative large pharma companies that are homegrown in China and India continued its track with genetics. So feel extremely good about what's happening in pharma. I mean that remains one of our strengths and really sort of looking forward to what the rest of the year brings in that category.

Okay. That's helpful. And then maybe one on BD. I guess in hindsight, now that you guys have been behind the curtain a little bit here for a few months. When you look back at the 4Q kind of underperformance, how much do you think was just kind of an air pocket as the transition of the management happened? I guess what I'm asking is on the execution improvement versus the actual market improvement, what have you seen from 4Q to 1Q and then the expectations going forward?

Yes. Look, I mean, as we've come into come into the ownership. We've seen tremendous collaboration with -- amongst the teams. The integration plans were put together across the BD teams and the Waters teams and it was, in some ways, an advantage to have time between announcement and close. So that diligence really got the quarter -- the owned period of the quarter off to a fantastic start, right? I mean the diligence that you've seen with Waters in the past with really sort of focusing on high-quality funnels. I mean our funnels look better than they ever have. the forecast accuracy improved as a consequence.

We've implemented the pricing initiatives across the 2 new businesses, really incredible transparency and collaboration on looking at reagent rental contracts and also the China localization piece. So the 180-day plan itself was put together in collaboration with the teams. And to your question on air pockets, et cetera, it's very difficult to judge such things. I mean it was a declining business. But you see an advantage of just giving it focus. And what I'll remind you is that these are 2 businesses that have leading brands, really sort of brands that define the category. They are in high-volume regulated settings, and our Waters playbook is very relevant there, and you're seeing the impact of that.

Your next question will come from Vijay Kumar with Evercore ISI.

Great. Udit and Amol, congrats on a nice spread and thanks for all the detailed disclosures in the presentation. That was really helpful. Maybe my first one on this BD performance in Q1. And when I look at the full quarter reported growth for BD, it looks like it was flattish, but for the period owned under Waters, it was up 5%. Maybe just talk about this delta between the full quarter versus period owned. Was there any timing shipments, those kind of things that aided performance under Waters ownership. Is this because of extra days? And I'm curious, I think the prior guidance was assumed BD to grow maybe up low singles 2%. Has that changed at all?

Yes. I mean, look, when we put together our guidance, we factored in things such as there will be a few extra days because of the quarter, but also a few days when the situation will be disturbed during the close, right? And that's how we sort of prepared our guidance. The way the teams executed makes us feel really proud that things are working, the 180-day growth revitalization plan is starting to bear fruit, and that's what sort of resulted in this significant $40 million beat, right?

And what we've done with that is we've sort of derisked our second half of the guide and makes it far more palatable. We've sort of taken down sort of point of care in the second half of the year to not be an average, but significantly below average. And that gives us a lot of room to outperform and puts us in a great spot for the remainder of the year.

Understood. And then maybe my follow-up on -- given that you mentioned that days of back here, when you look at core Waters, it 11% organic, what was underlying organic ex days? When you say back half is 6%, is that for core organic or pro forma organic inclusive BD. And given your comment on order strength, I'm curious on why back half couldn't be better.

Yes. So I mean, look, the extra days benefit our recurring revenue. And roughly, we had 4 extra days in terms of working days, and that brings about 4% more recurring revenue, which is roughly 2% more total revenue for the legacy Waters business. But even if you strip that out, I mean, chemistry grew 13% and service grew 14%. So both of them, even after you take out 4% flying at meaningfully elevated levels versus the historical performance, and that's to do with how our teams are executing really well in the field.

For the guidance perspective, our first half growth for the legacy business constant currency is roughly 9%, and we've derisked the second half. One for the 4 or so extra less working days that we have in Q4, 2 just because of the current macro, right? And so the second half embedded constant currency growth guidance is roughly 6%. That puts us in a really solid spot because we're not seeing any of that in our funnel. On all remains very strong, and we continue to fly at the altitude that we are flying at that gives us great confidence on the second half of the year.

So Vijay, just to sort of conclude that thought. As you go into the remainder of the year, I mean there's fantastic momentum on the base business. There's no 2 ways around it. The 180-day plan has sort of got off the acquired businesses to a great start. But remember, there's a lower baseline already starting in Q2 with the respiratory headwinds gone. For the latter half of the year, there is no DRG sort of headwinds anymore as well. And then you augment that with new launches, FXI BACTEC, as well as the A7 in our Bioscience business and the reagents and the revenue synergies that start to play out as well. So we are really sort of positive about the setup that we see for the balance of the year.

Your next question will come from Doug Schenkel with Wolfe.

So first, on competition. One -- I guess there's 2 here. Your team is bringing a new level of discipline to the life science business. I'm just wondering if there's been any notable competitive responses worth calling out. The second question is, there's 2 product areas where you are or will soon be competing with private equity-owned businesses. Generally speaking, how does competing with PE differ? And does this create new opportunities for the business?

Excellent questions, Doug. Look, on waters itself and competition, I mean, I'll repeat what I said earlier, we are diligent about being focused on high-volume regulated settings, right, where the drivers are very well understood and are consumption oriented, and that's allowed us to outpace the market over the last several years.

And in those setups, I mean, we have leading brands. We had it with the legacy Waters business. Now we have it with Bioscience, which defines the flow cytometry category and reagents and with the diagnostic solutions business with microbiology. So we feel very good about the brands we've inherited and we're working hard on bringing the same execution discipline that has bought waters to the top of the league table, both in growth and margins and free cash flow. So as we start, and your question to, sort of, I think the microbiology business that's been acquired by PE players, I mean, we think it's going to be quite rational in terms of pricing. And we are a pricing leader in the categories we compete in because we bring in tremendous innovation into the markets. And we expect something similar from the PE player. So not worried. I mean, I think we are now in a position where, as a team, we're more focused on unmet needs on proof of principle of our new products, commercial execution than anything else.

Your next question will come from Evie Koslosky with Goldman Sachs.

So starting with the core business, can you talk to the mid-teens growth in chemistry. I think it's well above the full year guidance that you previously gave of around 6% to 7%. So how durable is this growth moving forward? And what's the updated guide for chemistry in the full year?

Let me start, and then Amol can talk to the guide. I mean, you can say nothing more than just being ecstatic about what we're seeing with chemistry, right? I mean this is a journey that started a few years ago when we took our R&D dollars and dedicated 70% to 80% of them in bioseparations and the steady stream of new products is driving growth, right? I mean that's what you saw in the latter part of the year last year, and you see it now as virtually all new molecular entities, especially biologics, are first looking at Waters offering and then going elsewhere. So we feel very good about where we stand.

And as you look at the mid- to long term, I mean, there is no reason to believe that all of this will not flow downstream and chemistry on the mid- to long-term basis, should now be instead of a 7% grower, a 9% to 10% grower at least. I'll let Amol comment on the balance of this year and our guide assumptions.

Yes. I mean, look, in Q2, there was a little bit of pull forward, which we outlined in our last year's Q2 earnings call. And in general, we've been cautious given we had such an amazing double-digit growth in industry every quarter last year. We are sort of reducing the guide for this year to like 6.5% full year. Just to be prudent. But I mean, what we are seeing in Q1, 13% growth, that is real and that we expect to continue. The only reason we are guiding at 6.5% is the baseline is pretty strong, and we're being prudent.

Great. And then on the acquired asset, can you talk to the decision to localize the manufacturing in flow cytometry in China? How much of an investment does this represent? What's the local competition like? And then how durable are some of the market growth drivers like MNC pharma funding in the region?

Yes. I mean, look, I, thanks for the question. But let me start sort of at the highest level. I mean pharma in China is doing extremely well. I think we talked about this several quarters ago. roughly 1/3 of all biotech molecules that are unlicensed by large pharma now come from China. That has then helped the CDMO industry grow and also is giving birth to sort of fully integrated innovative pharma companies in China. And pharma for us in China grew over 50%, right, behind these trends and strong, strong execution. And this sort of result was only possible because we have a fantastic team in China that insisted that we localize our portfolio in China to be available to customers across the board, and we did that first for Analytical Sciences business. And we intend to do the same for Biosciences where at this point, not much of the portfolio is localized.

So we're doing that at a rapid pace. We have our own site in Suzhou, where we'll start doing this. And in Q3, you should start seeing the orders flow in from the localized portfolio. There is another headwind in China for the flow business, which relates to export controls. And there, we've streamlined the process dramatically during integration planning and now since the close of the deal. In fact, we've seen the highest number of orders flow in, in the last few days ever since the ban went in place. So it's the same playbook EV that allowed the Analytical Sciences Solutions business to now really set the standard for the industry's growth in China, and we expect to do the same for Bioscience.

Your next question will come from Puneet Souda with Leerink.

The first one on pricing versus volume. Could you talk a bit about how much of the growth was driven by volume in the quarter? You talked quite a bit about pricing initiatives. But wondering if you could drill down a bit and just give us some volume growth metrics in the BD business? And how sustainable is the pricing tailwind just given the competition and, let's say, the microbiologic business?

Yes. So on the legacy Waters business, we did roughly a little over 200 basis points of price, and that's consistent with how we've been performing the last few years. On the BD business, we did just about 0.5 percentage of price, which is in line with how BD has been doing historically. That's also what we've embedded in our full year guide, nothing different from the historic performance. We do see a very meaningful opportunity to bring the BD business where our legacy Waters business is. And as Udit outlined, we've already instituted 2 deal desk. We see tremendous areas of opportunity, not just in pricing but also in tariff mitigation and also in reagent rental contract compliance. All those are opportunities we are pursuing, none of which are in our guide.

Yes. And just to sort of add one other comment on pricing. There are pockets already, Puneet, in the in bioscience and diagnostics, where we see pricing similar to what we've been able to implement in the legacy Waters business. The reason we're not putting it, embedding it into the guide is simply because we want to see that play out and be sort of pervasive across all geographies. And so really good starting point and I expect that to be an upside as we go through the year.

Got it. And then on the core, I mean, congrats on the momentum there. I just wanted to get a sense of -- in the LCMS instrument replacement cycle, where do we stand? Are you seeing sort of a pull forward of that replacement cycle peak that, I think, you were expecting in '27? Could we see that in '26 now? Just wanted to get a sense of where we stand in the replacement cycle.

Yes. I mean, the replacement cycle is going really well. And as we outlined, right, I mean it's first started with large pharma than the CDMO step team. There are still some participants like the CROs and the Chinese branded generics and some of the biotechs that are still not replacing even when their fleets are significantly overaged. And so that gives us a good runway into 2027.

And then keep in mind, 2021, 2022, were very large instrument placement years, and those instruments then come up for replacement in 2029, 2030. And so one would say, hey, you may hit a bit of an air pocket as we go through 2028. And that's exactly where the reinsuring dynamic plays out because a lot of reshoring placements would likely happen second half of '27, all of 2028. So the setup is really good. We could move seamlessly from one instrument replacement cycle to another with the reshoring bridge in between.

This concludes the Q&A portion of the call. I will now hand it back to Caspar.

Thank you, Lila. This concludes our call. We look forward to connecting with many of you at upcoming events and conferences.

Terrific. I think we can start. Dan Brennan, life science tools and diagnostics analyst at TD Cowen. Really pleased here at 46th Annual Conference. To be joined here on stage with Udit Batra, who is the CEO of Waters Corp. So Udit, welcome.

Thank you, Dan. Pleasure to be here.

Terrific. So obviously, it's been quite a start to the year for you, closing the long-waited BD deal, integration ongoing. Listen, you've laid out plans for the business in great detail. Now that you've had a little bit of time owning BD business, maybe just zooming out what are some of your early impressions? Or feel free if you'd like to talk about 4Q and kick off that, just in terms of -- sitting on the table here for the conversation.

I think, firstly, again, thank you for having me here. It's been 3 weeks since the close occurred. So it's been some time, as you say. I've been very busy. Just traveling and going to different sites last week I got some of my colleagues in the U.S. together at our Baltimore site, which is the old diagnostics solution side for BD. This week, I'm heading to Europe then it's Asia after that. So traveling a fair bit, meeting a lot of customers. I think and meeting a lot of colleagues I think 3 things stand out. And the first is these are fantastic businesses.

And how do you tell? You basically ask yourself, is if you talk to some customers, if you talk to them, what flow cytometry, what brand do they mention? And I was telling some people earlier, go search in AI, if you feel like and ask AI whichever tool you prefer to use, I wanted to buy a flow cytometer I want to buy reagents, which company should I go to? BD will be at the top of the list. And now Waters.

Microbiology, go to any hospital, it's one of 2 vendors who supply most of the microbiology workflow in those hospitals. So leading brands, customers have a very strong impression of these and have had them for years. And that you tell by just looking at the gross margin. For most of the business, the gross margin is around 60%, which is healthy. And it's been there for a while. You go and talk to the teams and especially with the R&D teams, I mean -- and you do searches on PubMed or you search in any sort of publication, go to any conference in flow, in microbiology, you'll find BD colleagues presenting. So the teams are highly engaged, and I'll come back to that in a bit.

The challenge has been executed. I think we've been pretty clear about that during the time that we've gotten to this point. But it's pretty clear that the level of precision that is required to run such a business, especially in a dynamic environment, I think needs improvement. I think that's it. I mean so fantastic businesses, great brands, highly engaged teams.

The question is, can you focus on a precise few things? And so I've been spending a fair bit of time with the teams sort of assessing that. And as I said last week, I was with our U.S. teams. What we do is what sort of -- what I'm trying to do now is I'm going to go region by region. I'm going to get the top commercial people together and the top finance people together in a room and go business by business and say, hey, tell me about the past, past 4, 5 years. Tell me about quarter-to-date sales and orders and quarter to-go sales and orders, what are your risks and benefits and tell me about the organization.

And we go team by team. And we say, okay, tell me, tell us about one or the other. And it's just an awesome learning experience. And you see cross-pollination. For instance, our Waters, our incumbent Waters business, the Analytical Science business, has been passing on pricing for a while. We have something called the pricing desk, the deal desk. And they talked about it, and said, this is the deal desk. And yes, during this time, there was some pressure, on A, B, and C customer segment. And this is how we passed on 250 basis points this year.

And you could see the Bioscience colleagues or the Analytical Science colleagues who've had -- 0 to 50 basis points of price being passed on, look at it and say, okay, I can implement this, this and this. So really fantastic discussions.

And to sort of talk about the software side, we had our Town Hall, where we welcomed all the colleagues, roughly 12,000 people joined live. So we did -- we broadcasted across 4 different sites. My leadership team was spread out, and the rest sort of had it on replay. I must say there's a lot of energy in the organization. So very happy with where we are. Very happy with the starting point, and yes, focused on execution now.

Awesome. Maybe just sticking on 4Q for sec since I introduced that. I think the -- obviously, the core Waters business has been doing quite well. BD in their calendar fourth quarter, they had a pretty steep decline 11%. I know there were a bunch of numerous nonrecurring factors, which you kind of flagged and if you strip those out, maybe the growth was more like flattish. So what do you think the message is I think that's been a key factor. Kind of what's the message on BD's 4Q? And should those results in any way, lead to lower confidence in the asset or the outlook.

Look, I mean, it was as much of a surprise to many of you outside as it was for us in some places. Now each individual item can be explained, and we will get out of this idea of explaining all the time. I think that's something that as Waters we don't try and do. If there is a challenge, what did you precisely do to surmount it. But sort of to explain the facts first and then we'll get to 2026 in a minute.

There were 3 nonrecurring items, and we've cross examined this at a -- there's a lot of detail. And I'll get into that in a minute. 3 nonrecurring items and 1 recurring item. And if you take those out, as you said, the business was flat. But you shouldn't be taking those out. Just as a matter of record. The 3 pieces that were nonrecurring were the licensing costs for the licensing revenue for the Bioscience business, that didn't recur. The point-of-care slowdown due to the flu season. And the third was the government shutdown sort of impacting exports into China.

And the recurring item, which is the DRG headwinds in China. We think that will still persist into this year, sunsets in July in the baseline and then the baseline is a bit better.

Now if you take 3 of these in turn just to sort of first stick to the facts and then we'll come back to sort of what we're doing to make it a bit different in the future, overall, the business declined about 10%. You take this out, it's roughly flat. In Q1, we've said, look, the DRG piece is still going to be there. So we're going to guide to minus 2.5% or so 2% to 3% decline in Q1.

As you progress through the year, that gets a bit better. So it's flat to low single-digit growth in Q2 and Q3. And then in the low single digit to mid-single digit in Q4. So sort of a mathematical progression that just benefits from the baseline progressing. That's all it is. And we've said we're going to haircut the versus the deal model, the top line for the full year by 200 basis points, and that's largely due to the DRG headwind in China.

And so we've said, look, we'll take it down by $65 million, which is about a 30% decline on top of what has already taken place. So rather conservative starting point. It does not include improvements in pricing, on tariffs, on the daily sort of sales mechanism I mentioned. It does not include the revenue synergies. So a whole bunch of things are not included in the operational improvements. But we think it's a prudent starting point because it allows us also to adjust the cost base and still delivered the EPS that we had promised.

So even with all of this, we said, look, the EPS commitment is still sacrosanct, and we're going to deliver the EPS growth that we promised. Now to the 4 issues and why I said the explanation business will at some point stop, and I just want to take one case in point, which is the weaker flu season impacting the Diagnostics business by about $30 million. And we looked at it. And so my CFO and I had run a diagnostics, a flu business back in 2008 and '09. And first, you never forecast a flu business to be great. You usually forecast it to be lower. And if it's better, you claim victory. This is what we did when we were in charge of those businesses. But here, we sort of claim -- we said we're going to forecast it at a medium or a high level.

The question is not that you were down by $30 million. The question is precisely in which hospital, in which setting, how many patients, why is that number around number at $30 million, and it's not $3.5 million or $21.8 million. Because the level of precision missing means to me that it was a reason as opposed to being a precise causal impact. And so I think that was a big discussion we had last week when we were sitting together as a team and we cross examined it.

And I think my BD colleagues or my past BD colleagues simply said, look, we've never had that sort of precision being requested. And I said, look, you've got to go back and you got to fix these things yourself. If point-of-care went down, something else must have gone up, why didn't you focus on that. So I think going forward, you should not -- you should expect us not to get into this reasoning for why things missed. And yes, there's force majeure. Things happen. And those everybody in the industry is impacted with, but you will not see unique things.

Maybe just one more kind of on this area, and then we can jump out. But just particularly on the Bioscience business in the U.S. I know that was weak and you had the IP comp. But that business was still down 10%, and those are some questions we got. So on that business itself, kind of you elaborate a little bit on that business being down. And kind of what type of growth are you planning for '26 for that business?

Yes. So I mean similar sort of theme. First, take a step back, I mean, the businesses are exceptional. I mean flow cytometry, BD in the past and our Bioscience business sets the standard with the FACSDiscover with FACSLyric. Our antibodies set the standard in the industry with reagents and dyes that only we produce.

And roughly 50% of the business is in regulated applications that are no different than our QA/QC business. So it's -- the structure of the business is exceptional. When you look at the facts, and you say minus 10%, yes, that's lower than the market. And you sort of do a survey and this we did over the last 2 weeks of all similar competitors, given the markets, the business should have been down low to mid-single digits, not double. So there's a 500 basis points underperformance versus what I would have called the market.

And again, sort of let me go into a little bit of detail and how we're going to fix it. So first, just the math. Into Q1, we're saying this business is still going to be down mid-single digits. Remember, I said 2.5%. The Diagnostics business will be down low single digits. This one will be down mid-single digits. So we want to sort of give the team a bit of time to recover. And that's for the own period. And over the year, it will start to get better.

But digging a little bit deeper on the sources of underperformance and why I'm confident that these types of things will not recur. Let's just take one of the explanations that was -- that I sort of talked about earlier was the decrease in shipment of -- or the decrease in getting licenses for shipment to China. With a 45-day government shutdown.

The government was shut down for 45 days. And remember, I said last week, we had all our U.S. heads together. So I said to them, I said, why don't you review your business by end market. So the U.S. General Manager reviewed his business by end market. And in the U.S., our academic and government segment grew 14%, Americas was up 10%. The shutdown impacted them as well.

How did you manage to grow 14%? Because one university was not growing, another one was growing. We knew the shutdown was coming. So we preloaded some of the orders and had the customers buy in advance of it. And customers did. I mean I'm witnessed to the fact that we had a run-up in orders and sales right up to the government shutdown and an immediate buying and then a slowdown towards the end.

But we saw that, whereas our Bioscience team said 45 days the government to shut down, I can't get licenses. Why didn't you go to the folks and say, hey, you can get these licenses before the shutdown because the shutdown was telegraphed. It was not a surprise. So that showed us the difference in precision and execution.

As I said before, the businesses are great. Customers love them. The teams at the ground level are great. It's a question of precision of management. And being resilient during those times. And I think that piece I expect to have an immediate impact on. And the second one is pricing. I mean, in this business alone with the most differentiated portfolio in the industry on reagents. So I -- at the Town Hall 2 weeks ago, I took our whole set of businesses, and I put them on the XY chart. And I said on the X axis, we'll have growth on the y-axis will have gross margin, and we'll go 2 or 3 levels deeper into the portfolio. The highest margin business in the new company is the reagents business of Bioscience, by a lot. Higher than our chemistry, higher than our informatics. That tells you how profitable that business is.

The challenge is if you do this XY axis the top right is great. I usually tell people don't ask me, just keep going. Top left, is accretive to margins, but growing slower than the company average. And I say just stop everything else, especially if you're the reagent business, find ways to grow. And in that business, we've been getting -- 0 to 50 basis points of pricing. We are the most differentiated reagents company in the market. Why aren't we getting better pricing? Why aren't we getting better distribution?

So the marching orders become clear, and that is 70% of the Bioscience business. You see there are sort of immediate opportunities to impact the business, and that's where my attention is focused. I was sort of talking to my IR head, who is a fantastic guy, Caspar is here, and Caspar keeps sort of -- he says, it's our job also to go and talk to investors. And yes, but I got to go and talk to the teams and got to talk to the customers because the business has to start moving, you said you're not that as necessary as you think you are. So -- but I'm enjoying that part a lot.

So maybe just kind of putting a bow on this conversation. And so you set the guide, you talked about the cushion that you baked in. Then subsequently in the last 2 weeks, you've done a lot of these meetings, Town All, Forensic Analysis. How do you feel after all the Forensic Analysis versus the guy that you set on BD?

I think the 2.5% is sort of our -- as we said in the open -- in the quarterly call as well. I mean it's a prudent estimate. And you know us for several years now. We have 5, 7 ways of getting to 2.5% and more. It doesn't include pricing. It doesn't include the operational improvement. It doesn't include all the reagent stuff that I just talked about, definitely doesn't include the revenue synergies. So I feel pretty good about the 2.5%.

Got it. Okay. So maybe switching gears to core Waters, right? So the core Waters I think 2026, you're like [ 0.0625% ] organic guide for stand-alone. You grew a little bit faster than that in 2025. Maybe what are the puts and takes kind of underneath that guide? Should there be a slight deceleration? Still very healthy growth versus the rest of the industry. But I'm just wondering or is it kind of a rounding error?

Our guidance philosophy has not changed. So we start the year at a certain point, and then we get constructive as the data point comes in. Second, I'd also said this in the call -- in the analyst call earlier, the year has started off well. The funnels look very strong. I mean the end markets have stabilized. So it's quite a good setting. I mean, notwithstanding what's happened over the weekend.

But that said, the end markets have stabilized. The funnels are strong. There's no reason to believe that there should be any deceleration. That said, if you just look at the guide very simply, the lower end of the guide, the 5.5-ish percent or 5-ish percent is the instrument number, at least as a starting point. And the top end of the guide is the recurring number. On the recurring side, chemistry, we assumed grows between 6% and 7%. I'm saying this with a straight face for now. And services 7% to 8%.

Now chemistry has grown 12% in 2025. Service has grown 7% in 2025. On the chemistry side, yes, new products are coming in. We just want some room given the stronger baseline. And on the service side, we've expanded our attachment rate by 400 basis points in 2025. I mean we've given Rob Carpio and his team 100 basis points. So a target, they did 400 so we didn't set the target right. We need to take a look at it. But every time you get 100 basis points of service attachment improvement, the next year, you see 70 basis points of revenue increase.

So that's 250, 280 basis points just like that, that we are spotting for the next year. So we feel pretty good about the guide. As I said, as the runs come on the board we'll start to get more constructive. And to sort of complete the story on instruments on the replacement cycle on a 6-year CAGR basis, we're at 2.5%, still low single digits. The idiosyncratic growth drivers are contributing nicely. We have a very good position in GLP-1, PFAS testing India generics. And new products are now augmented with CDMS with the ever-expanding chemistry portfolio. Super excited about the Empower superhighway, really going from an on-prem to a subscription model. So feel good about the Waters based business, and we have a fantastic group of people managing that business.

So maybe just on the LCMS replacement cycle, you just mentioned where you're stacking on a 6-year CAGR so I think you've talked about getting back to high single digits. So where would you put that duration then? Like where do you think maybe the peak quarter would be on like LCMS?

I think, I mean, we're probably in the mid-innings. So I would think sometime in 2027, it starts to go back to the average. And remember, we haven't yet seen any meaningful replacement in biotech and pharma drug discovery, to some extent, the CROs are starting to come to the table. We haven't seen anything in genetics in China. So those segments are still pending.

And in spite of that, we're seeing nice replacement, especially in large pharma, in U.S. and Europe. That's what's been driving the replacement cycle a lot more. So mid-'27. And then what happens then, and we have sort of good customer discussions on reshoring. I mean we will not quantify that. I mean there's -- we're not afraid to quantify anything. I think there's just not enough facts available to say, precisely, this is what the upside is, but the conversations are there.

The ground has been broken. You look at the different announcements of the pharma companies. And we're all over the -- we're all over those, and we'll see a benefit starting sometime in '27. And that dovetails nicely into the finish of the replacement cycle sometime in 2027, you'll start to see probably another growth cycle for instruments and ironic -- I mean it's not a long-term benefit, this reshoring. But in a strange way, you might see strong LCMS growth for a while.

Right. So typically, when it peaks, the goal would be, what kind of get back to like a 5% growth or what typically happens there?

Yes. 5-ish percent. And it stays there and then it will probably saturate, people get more comfortable with their instruments and they extend the use too much. Our service team is very proud. So they extend the use as well with the customers. And then they realize, geez, this is too late, and there's a new sort of instrument coming in. And then it flips again. So it will always be just human behavior is such that you'll get excited. You get this replaced and then they'll extend the life too much.

It's like driving your car as a graduate student. I mean I remember, I used to drive my wife when I started dating in a car, which had a hole in the middle. So I had to pull the gear shift out and then move it. And she said, hey, I don't -- is this a car as best you can do? I said, yes, you have an extra window. So you find a way.

So since you brought reshoring, just one question. I think Waters is the size of the $300 million, you're not willing to quantify? Do you think -- I mean, any comment on their size?

I think it's too early, Dan. And we'll quantify. Look, I mean, we're very precise on our quantification on the GLP-1s and PFAS, on India generics. I think just let's get a bit more factual before we start to quantify everything.

And then kind of baked in with that 5% growth for instruments this year. What did you assume for LCMS growth in 2026? And what do you think a range of outcomes...

Similar sort of high single-digitish. No different -- I mean, and I can't promise exactly what will happen 1 quarter or the other. I mean, sometimes these are large purchases that will happen at the end of the quarter or the beginning of the quarter, and that might change things. But overall, no real change.

Right. So maybe just on chemistry, I think you just articulated the conservatism or the conservative nature of the guide on several funds. But just on chemistry itself, you talked about the kind of the 300 basis points, 2.5 points of upside that, that could generate. But with the new products, like where -- just talk about some of the new product and the opportunities on the chemistry and if you stack those, where the theoretical upside?

So I mean the strategic reason -- I mean and the strategic board was set sort of 4, 5 years ago, when we said we're going to take our investment and move it from small molecules to large. So over 70% of our R&D spend in chemistry goes into bioseparations. And that has started to pay dividends. I mean, we launched the MaxPeak Premier technology with the bioinert surfaces on top. We build specific columns for large sort of species like AAV with the SEC columns, then we said, hey, oligonucleotide, a specific solutions, so we come up with this thing called slalom. And then we said, look, and this is the latest one, we said we're going to take affinity chromatography from bioprocessing, my previous world, and we're going to move into high pressure chromatography, which is something that most people have not been able to do with reproducible results.

We're going to do it in such a way that you can tune these columns. And that's what we were able to do with our affinity columns with protein A. And now we've launched another column, which is microflow, which is specifically for proteomics applications. So this will keep going. I mean, there are 7 to 8 new launches coming this year. This will keep going for a while. The difference is that this is not only targeted towards QA/QC. This has gone upstream.

And when you go upstream and you are sort of one of the largest players in that space, and if the product is doing what it's supposed to do, that column stays with the molecule. The customer has no reason to change it. Customers do change those as we've experienced ourselves in Phase II, Phase III, usually qualify 2 vendors. But if you are the only solution, and you have customized the separation with the customer, especially with affinity columns, where you sort of are taking a sticker and you're designing the sticker that is only relevant to the molecule that the customer is developing. It's unique. It's a one-to-one link.

That then as it moves downstream, it's like bioprocessing. It's spec-ed in, it's a low double-digit grower. I'm not promising low double digits now. All I'm saying is, as we progress we can -- that is -- there is line of sight to that. 12%, then if I say double digit right now, you say, well, double digit all the way through. No, there will be ups and downs because it's in discovery right now. High single digit to low double digit is a reasonable expectation for chemistry.

Okay. Maybe jumping over to margins. I think implicit margin assumptions of BD of like mid- to high-teens operating margin to begin the year, and I think they were like low 20s prior to the year. Just talk a little bit about the cost you're digesting, the margin guide and kind of where do you think BD margins are kind of normalize?

So there's a few moving parts. Let me sort of take it in turn. So the most important thing to know is 22.4% is the full year margin. I mean that's sort of BD or bioscience and diagnostics stand-alone, not including synergies. There are 2 or 3 things to keep in mind. One is that the first on the phasing and then on the amounts. On the phasing Q1 is the smallest quarter. So BD has a specific phasing. Q1 is about 23% of sales. Q3 is the largest quarter that used to be their Q4, so that's 27%. And Q2 and Q4 are 25% each. That's the revenue phasing. The cost phasing is such that the Q1 is about 300 basis points lower or 200 basis points or so 2 to 300 basis points lower than the average. And Q3 is 300 basis points higher.

So Q1, 200 basis points lower, Q3, 300 basis points higher in margin just because of the revenue phasing and the way the costs are. So that's the baseline. On top of that, what we've done with the business slowing down last year, we said, look, you haven't implemented tariffs. So we're going to implement tariffs this year, and I just want a -- small anecdote, when we said that, the team said, hey, you're going to implement tariffs. That was a year ago, the customers are not going to respond to it well. Our President is pretty active. So he changed the tariff regime now, and that's the reason to do it now right. So we'll implement tariffs like we did in Waters, we'll offset the whole thing in -- before the beginning of '27, but in 2026, there's a 60 basis points lift due to the tariffs. And then the slowdown in China should have led to a readjustment of the cost structure.

Our colleagues at BD never did that. So we're -- we've already implemented that and you will see the benefit of that in the second half of the year. That's about 120 basis points. So 120 plus 60, 180 basis points you add to what you would have calculated as the baseline, and you get to 22.4%. And the margin progression through the year will reflect a little bit of conservatism at the beginning of the year. We just want to sort of keep a little bit on our back pocket and a bit of a lift due to the cost savings and the tariff implementation towards the back half of the year. And then you superimpose on that the phasing, you'll get the math that is pretty straightforward. So not a lot of rocket science in it.

Again, the more important thing to keep in mind is these actions are in place. They are getting implemented. No cost synergy, no operational improvement isn't it. Pricing is at 50 basis points today. We think we should be at 200 plus given the differentiation in the portfolio. Don't ask me if it comes tomorrow, but it's coming. The weekly sales calls and funnel management, then it was not a discipline. It's happening now as of last week, we sort of showed people exactly what we do at the top level, what we expect at the regional level, what we expect at the sales level. What level of precision we expect in the funnels. And thirdly, if there's any changes, how do you sort of combat it. So I expect that to have a significant impact on the business as well. I believe the 2.5% and the 22.4% are minimum numbers that we should be achieving.

And do you feel on BD, just thinking about BD again like the people that you've seen so far, will there be a lot of like -- like how significant a change do you think you might have to implement there? Is it just pruning around the margin or just...

It's -- Dan, it's always a difficult question to answer, but go back 5 years at Waters. We turn the business without changing any of the top management. I mean you remember in 2021 -- 2021 alone, we had 16% of growth, and that was coming off years of sort of trailing the market, and that was one of the highest growths in the market, that was without changing anybody in the leadership team. And Amol came in the middle of 2021. The others came a bit later. So I don't -- I see the same thing here that at the grassroots level, the sales teams, the R&D teams, the supply chain teams, and people are super dedicated.

I mean there's a lot of pent-up energy. The challenge has been focusing on a few things that are important. I mean focus on getting the reagents business moving and not -- don't just get obsessed with the instrument business, which is struggling because of the end markets. So don't be obsessed with that because 70% of your business is in reagents. That sort of thing.

So focusing people on specifics and then holding them accountable and giving them support. So on pricing, we're asking people to do more, but we're going to train them. On tariffs, we're asking people to do more. We had the training session last Friday. So the method to the madness on this commercial meeting that I'm having with each of the regions is also cross pollination.

I mean, so for instance, in the U.S. A&G market, as I mentioned, slowed down. Our U.S. team found ways around it, and they shared those tactics with our Bioscience team. And so I think I would expect the same sort of turn. And when these turns happen, they happen very rapidly because you're not asking people to learn new things. You're asking them to do what they knew how to do all the way all in the past, and you're taking out barriers from a corporate setup. I mean at a corporate level, our China team wants to localize a bit more of the portfolio in flow, we have done it on LCMS very rapidly. I spoke to the GM there, and he said, hey, Udit, I want to localize. I said, okay, how can I help? I'm not saying I'm not going to do it. I know you know your business best, but just let me know how I can take our barriers from a corporate setup.

So I feel good about the baseline. But yes, there's a bit of discipline that will be put in place.

Well, great. I think that's a great wrap up. We started on BD. We ended on BD. We told the story in between Waters. But thank you, Udit for being here, thanks, everyone, in the audience as well.

Good morning and welcome to the Waters Corporation [indiscernible] 2025 Financial Results Conference Call. [Operator Instructions] This call is being recorded. If anyone has any objections, please disconnect at this time.

It is now my pleasure to turn the call over to Mr. Caspar Tudor, Head of Investor Relations. Please go ahead, sir.

Thank you, Leyla, and good morning, everyone. Welcome to Waters Corporation's Fourth Quarter Earnings Call. Joining me today are Dr. Udit Batra, our President and Chief Executive Officer; and Amol Chaubal, our Senior Vice President and Chief Financial Officer.

Before we begin, I will cover the cautionary language. In this conference call, we will make various forward-looking statements regarding future events or future financial performance of the company, including the expected financial and operational impact of what is combination with the Biosciences and Diagnostic Solutions business of Becton, Dickinson and Company. We will provide guidance regarding possible future results, as well as commentary on potential market and business conditions that may impact Waters Corporation over the first quarter of 2026 and full year 2026. These statements are only our present expectations and are subject to risks and uncertainties. Please see the risk factors included within our Form 10-K, our Form 10-Qs, our other SEC filings and the cautionary language included in this morning's earnings release.

During today's call, we will refer to certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP measures are attached to our earnings release and in the appendix of the slide presentation accompanying today's call. Unless stated otherwise, references to quarterly results increasing or decreasing are in comparison to the fourth quarter of calendar year 2024. In addition, unless stated otherwise, all year-over-year revenue growth rates and ranges given on today's call are on a comparable constant currency basis, and all quarter-over-quarter revenue growth rates and ranges on a comparable constant currency basis. Finally, we do not intend to update our guidance, predictions or projections, except as part of a regularly scheduled earnings release or as otherwise required by law.

I would now like to turn the call over to Udit to begin with our key messages for the quarter. Over to you, Udit.

Thank you, Caspar, and good morning, everyone. We delivered a strong finish to the year, achieving high single-digit reported revenue growth and low double-digit adjusted EPS growth in the fourth quarter. This reflects yet another quarter of industry-leading sales growth. Today also marks a transformative step forward as we complete the acquisition of BD's Biosciences and Diagnostic Solutions business. We are uniting world-class expertise across chemistry, physics and biology into a scientific powerhouse with category-defining brands and a shared culture of pioneering innovation. We look forward to welcoming our new colleagues later this morning.

It also marks the point at which we will have full operational control over the convey business. With months of rigorous integration planning behind us, we're now moving immediately into execution, applying the same focus and discipline that have driven exceptional results at Waters. We are entering this chapter from a position of strength. Throughout 2025, we have advanced the strategic road map that we laid out 5 years ago.

Commercial execution continues to strengthen with KPIs running ahead of the commitment we made at our March 2025 Investor Day. Innovation remains a powerful growth driver as we launch a new wave of pioneering innovation. Our unique exposure to high-volume testing opportunities across GLP-1s, PFAS and [ India ] generics, again, outpaced expectations. We secured key wins in our transition to Empower as a subscription-based model, and we continue to expand deliberately into our high-growth adjacencies like bioseparations and bioanalytical characterization. These outcomes reflect the strength and discipline of our simple, repeatable business model serving high-volume regulated growth markets. They also reflect the dedication of our team whose focus on customers, science and operational excellence continues to differentiate Waters.

Now turning to the quarter. As reported sales and adjusted EPS landed at the high end of our guidance range. Sales grew 7% on a reported basis and 6% in constant currency, driven by high single-digit growth across our pharma and industrial end markets. Adjusted EPS grew low double digits to $4.53, on a GAAP basis, EPS was $3.77. Recurring revenue grew 9%, led by chemistry growth. Instruments grew 3%, led by yet again high single-digit LCMS growth. TA instruments declined for the quarter due to cautious spending in U.S. and Europe.

During the quarter, we achieved strong wins in our transition to a subscription-based model for Empower, with successful adoption across multiple large pharma customers. While this reduced our overall instrument growth rate by a low single-digit percentage for the quarter, it reflects a strategically attractive shift to a model with superior economics. Together with our new feature releases, this supports accretive tailwinds in 2027 with the incremental recurring revenue that it brings.

For the full year, sales grew 7% on both a reported and constant currency basis. Recurring revenue grew 8%, driven by 12% growth in chemistry. Instrument revenue grew 5%, led by LC-MS, which grew high single digits or better every quarter of the year. Adjusted EPS grew 11% to $13.13, supported by top line strength, operational excellence and effective tariff mitigation. GAAP EPS was $0.76. Let me now highlight the drivers behind our strong performance and why we expect the strong momentum to continue into 2026.

Starting with commercial execution. Our KPIs continue to run ahead of external commitments, and we're progressing well towards our long-term targets. Within instrument replacement, momentum continues to build. Instrument growth is now tracking at 2.5% CAGR approximately versus 2019, up roughly 100 basis points since the start of the replacement cycle. This reflects a steady mean reversion towards the long-term historical instrument growth rate of 5%.

Service plan attachment increased to 54%, reflecting approximately 400 basis points of improvement in a single year. This is the strongest annual expansion we have ever delivered and sets us up for above-average service growth in 2026, supported by the associated revenue pull-through. E-commerce penetration reached approximately 45% of consumables revenue, driving a growth tailwind along with new products across our chemistry portfolio. Contract organizations now represent 27% of pharma sales, up from 15% 5 years ago, positioning us well among diversified sources of CapEx.

Innovation is also augmenting our results. Strong growth from new products launched over the past several years has continued to compound, alongside a new wave of innovation launched throughout 2025. For the full year, Alliance iS HPLC sales more than doubled, reflecting strong adoption of our flagship platform, which reduces errors by up to 40% in QC labs. Xevo TQ Absolute mass spec platforms grew over 30%, driven by PFAS demand and the launch of the Absolute XR, which sets a new benchmark for robustness, together with class-leading sensitivity. MaxPeak Premier Chemistry grew over 35%, underscoring the significant impact our technology has brought to the industry for larger and more complex molecules.

Our successful strategy of entering high-growth areas further enhanced our results in 2025. In bioanalytical characterization, adoption of light scattering and BioAccord continues to build in pharma process development and quality control applications. With the launch of Xevo CDMS, we are now expanding this position to routine characterization of mega molecules such as ADCs and viral vectors.

In [ BioSeparations ], we built on the success of MaxPeak Premier inert surfaces with a new generation of products designed to separate complex large molecules. These include SEC columns for viral vectors, [ slalom ] chromatography for large oligonucleotides and affinity-based separations using specific antibodies. These new products have accelerated chemistry growth to double digits in 2025, meaningfully above our 7% historical average growth rate. For LC-MS into diagnostics, we have continued to grow our assay menu, launching IBD products covering 12 new analytes in endocrinology, and 4 new analytes in therapeutic drug monitoring over the past 2 years.

Turning to our idiosyncratic growth drivers. In 2025, these drivers contributed more than 300 basis points of growth, all tracking ahead of our commitments. GLP-1 testing-related revenue more than doubled, contributing approximately 100 basis points of year-over-year growth. This reflects continued wins in development and manufacturing across the globe, supported by our [ specced-in ] position for both oral and injection-based doses.

PFAS testing growth remained robust, increasing more than 40% year-over-year and adding roughly 80 basis points of growth. Demand was broad-based driven by an expanding regulatory landscape that is evolving towards food, materials and consumer product testing. India, again, delivered strong performance. Ex GLP-1 revenue grew low teens, increasing by approximately $40 million and contributing around 130 basis points of growth, tied to the ongoing patent cliff of blockbuster drugs. Taken together, we grew 7% in 2025 with all regions delivering mid-single-digit growth or better.

Pharma revenue grew 9% with high single-digit growth across Americas and Europe, and low double-digit growth in Asia. In pharma -- in non-pharma end markets, industrial grew 6%, while A&G declined 1%. In China, we grew 9% for the year. Our team delivered exceptional performance by capturing renewed momentum in biotech and CDMOs, executing well in food and environmental applications and winning a series of academic and government stimulus centers.

As we now move into 2026, we expect continued organic strength supported by the instrument replacement cycle and contribution from new product innovation. We're also expanding our idiosyncratic growth driver framework from 3 drivers to 5. In addition to GLP-1s, PFAS and India generics, we're adding biologics and informatics. Biologics reflects future growth linked to bioseparations and bioanalytical characterization from progress we have already made in our high-growth adjacencies before the closing of the transaction. In [ bioseparations ] we anticipate sustained strength driven by new chemistry products already launched and in our near-term road map serving large molecule and novel modality applications. In bioanalytical characterization, we anticipate continued placement of LC-MS, malls and CDMS in process development and in QA/QC.

There is potential upside beyond our current assumptions supported by the FDA's draft biosimilars guidance, which could drive incremental demand by shifting approvals towards comparative analytical assessment rather than clinical outcome studies. For informatics, this reflects the future expected incremental growth linked to the phased transition of Empower from our legacy license-based model to our subscription-based offering. As we have shared previously, we expect to take our informatics business from its present revenue base of approximately $300 million to approximately $500 million by 2030.

The move towards subscription comes with a shift in revenue timing. Under this transition, revenue is recognized consistently over the life of the contract rather than upfront. For a typical customer converting to subscription, the breakeven point where cumulative subscription revenue equals the prior license value is reached in approximately 18 months. From that point forward, it adds incremental high-quality recurring revenue with a long-term visibility and margin benefits. We are executing this change gradually and expect it to become a more positive structural driver in the years ahead, beginning in 2027. Taken together, these 5 drivers are expected to contribute over 200 basis points of annual revenue growth accretion on a stand-alone basis between now and 2030.

Turning now to our integration of BD Biosciences and Diagnostic Solutions. This combination is a significant value creation opportunity that further adds to our attractive trajectory across 2 main dimensions. Firstly, it strengthens our position in high-growth adjacencies across bioseparations and bioanalytical characterization by adding critical technologies and expertise. It also adds to our LC-MS diagnostics business with day 1 commercial scale, customer channel access and automation capabilities.

Secondly, it provides a meaningful execution uplift opportunity by applying our operating discipline across instrument replacement, e-commerce adoption and service attachment, we expect to replicate the same growth acceleration that we have successfully achieved in our existing businesses. Together, this positions Waters for sustainable, high single-digit growth over the long term, and well beyond the current instrument replacement cycle.

The transaction also yields attractive cost synergies. Our baseline plan represents less than 5% of the combined cost base with the potential to exceed that level. Consistent with market benchmarks for deals of size and prior large-scale integrations that our leadership team have successfully executed. To ensure we capture this value quickly and consistently, we have aligned the organization around a new operating structure. We have organized Waters into 4 divisions, where each follows our repeatable business model with simple yet sophisticated instruments, compliance software, customized consumables and world-class service. This structure enhances accountability and will provide investors with a clear transparent view into the performance of all our key segments across the company.

First, Waters Analytical Sciences, formerly known as Waters Division, will continue to be led by Rob Carpio, who you all know well. The division comprises LC, mass spec, light scattering and particle analysis, together with our Empower informatics platform, chemistry consumables and our service team. Going forward, revenue from Water's Clinical Business will be reported within our Advanced Diagnostics division. Waters Biosciences, formerly BD Biosciences, will be led by Steve Conley, who has led the business for the past 3.5 years, and has played a key role in the launch of its next-generation flow cytometry platforms. The Waters Biosciences division consists of leading flow cytometry brands like [ Fax Discover ] and [indiscernible], the [ Horizon ] [indiscernible] brand of fluorescent dyes and reagents and [indiscernible] software.

Waters Advanced Diagnostics will be led by [indiscernible] Bennett, who has been running our Clinical and TA business unit over the past several years, and has transformed the top line growth profile of these businesses. [indiscernible] has a strong background in diagnostics, having served as Senior Vice President of High Growth Markets at [ Beckman Coulter ] Diagnostics before joining Waters. The Waters Advanced Diagnostics division consists of leading microbiology testing brands, including Bactec, Phoenix and [ Kaster ], as well as molecular diagnostic solutions with the Max and core platforms, LC-MS based solutions and point-of-care testing.

Waters Material Sciences, formerly TA division will be led by Dan Rush on an interim basis while we appoint a successor to [indiscernible]. Dan is our Senior Vice President of Strategy and Transformation and has a long history of leading commercial and strategy teams. He served as Vice President of worldwide commercialization strategy and innovation at [ Bristol-Myers Squibb ] before joining Waters in 2021. The Material Sciences division consists of products, services and informatics spanning a diverse range of materials characterization techniques, including thermal analysis, rheology and microcalrimetry. These are used in a range of applications such as battery testing for electric vehicles, pharma and medical devices.

Together, these businesses bring leading scientific capabilities serving customers in high-volume regulated applications. They're anchored by a shared operating model that leverages category-defining brands and a universal culture of pioneering innovation.

In parallel, we have aligned early execution priorities to hit the ground running now that we are gaining full operational control of the Biosciences and Diagnostic Solutions business. With several months of integration planning behind us, we have clear line of sight to the initiatives that will drive the most value in the early innings of the integration. In the most recent quarter, BD Biosciences and Diagnostic Solutions results came in below expectations due to impacts that became apparent during the quarter. In China, demand weakened due to increased focus on reducing consumption and diagnostics testing, while the U.S. government shutdown affected the Biosciences business as export approvals got delayed. At the same time, the point-of-care business was impacted by a milder flu season compared to the previous year.

As we look ahead, our cost and revenue synergies are firmly on track. In 2026, we will make swift and decisive progress towards achieving the objectives we've laid out. On cost synergies, restructuring, procurement savings and network optimization are key vectors that we expect to begin realizing this year. As a prudent starting assumption, we expect to realize approximately $55 million of adjusted EBIT from cost synergies in 2026.

On revenue synergies, while there is meaningful opportunity across each of our work streams over time, our first priority in 2026 is enhancing commercial execution and forecasting discipline. We will quickly begin to leverage untapped growth vectors in instrument replacement in e-commerce and service attachment, and will immediately establish a deal desk to manage pricing discipline. As a prudent starting assumption, we expect to realize approximately $50 million in revenue, and $25 million in corresponding adjusted EBIT from revenue synergies in 2026.

Let me now describe the first phase of revenue synergy realization in a little bit more detail. These are the same levers you've seen us execute successfully at Waters over the past 5 years. Starting with instrument replacement. There are approximately 22,000 flow and back tech instruments that are ripe for replacement. At the same time, a meaningful wave of new products are being launched, such as [ Fax Discover ] [indiscernible] and [ Back Deck FXI ]. To achieve our revenue synergy target of $20 million by year 5, we need to drive an incremental 100 instrument replacements per year.

To put that into perspective, during our prior indomitable replacement initiative at Waters, we delivered double the target in half the time. Our service plan attachment -- for service plan attachment, our $20 million revenue synergy target can be achieved by increasing attachment by approximately 1 percentage point per year, a rate that is more than consistent with our historical performance of more than 2% annually over the past 5 years. For e-commerce, our target is to increase adoption by approximately 4% annually, which too is a more measured growth trajectory compared to our historical performance.

I will now cover our 2026 guidance. Across our existing businesses, the team is executing well with a revitalized portfolio, leveraging instrument replacement and realizing benefits from our idiosyncratic growth drivers. As a prudent starting point, these dynamics support organic constant currency revenue growth of 5.5% to 7%.

Turning to the acquired business contribution. Following today's expected close of the transaction, we expect the Biosciences and Diagnostic Solutions businesses to contribute $3 billion of revenue in 2026. While the majority of headwinds that impacted the business in 2025 are already in the baseline, we have further risk adjusted our outlook to ensure a prudent starting point. We're assuming approximately 2.5% underlying growth in 2026 on an owned period basis before any benefit from execution and pricing improvements, or planned organizational simplification.

Taken together with the revenue synergies I just mentioned, this results in total 2026 reported revenue of approximately $6.405 billion to $6.455 billion. These starting assumptions imply a blended year-over-year revenue growth of approximately 5.3% at the midpoint of the combined company in 2026. This is an industry-leading growth guidance and carries clear opportunity for outperformance as the year progresses. From a profitability perspective, we expect to deliver a 2026 adjusted operating margin percentage of approximately 28.1%, which is already more than 100 basis points of margin expansion compared with our deal model in 2025. This translates to full year 2026 adjusted EPS of $14.30 to $14.50, which is also an attractive starting point, reflecting 8.9% to 10.4% growth. It includes $0.10 of accretion from the transaction versus Waters' adjusted EPS on a stand-alone basis even before reaching a full year of ownership.

With that, I will now turn the call over to Amol to review the financials and walk through our guidance in more detail.

Thank you, Udit, and good morning, everyone. In the fourth quarter, we delivered a strong finish to the year with as reported sales and adjusted EPS landing at the high end of our guidance. Sales of $932 million grew 7% as reported and 6% in constant currency. Orders growth outpaced sales growth in the quarter. By end market, pharma grew 7%. Industrial grew 8%, while academic and government declined 3%. In Pharma, growth was led by mid-teens performance in Asia, high single-digit growth in Europe and low single-digit growth in Americas. Instrument replacement remains strong along with new product adoption in both our instrument and chemistry portfolios.

In Industrial, Waters division grew low teens with double-digit strength across chemical analysis, food and environmental testing. Performance was supported by continued momentum in PFAS-related workflows, led by the sensitivity and robustness of the Xevo TQ Absolute XR mass spec system. TA division was flat, reflecting an improvement versus the first half of the year as customer spending trends continue to recover.

In academic and government, strong double-digit growth in Americas was offset by year-over-year spending declines in other regions. By region, Asia grew low double digits, while Americas and Europe grew mid-single digits. Within Asia, India grew high teens, reflecting continued strength in pharma generics. In China, sales grew 3% as strength in pharma and industrial was partially offset by timing of stimulus-related funding in academic and government. By product line, instrument sales grew 3%. High single-digit LC-MS growth was partially offset by a low single-digit decline in TA system sales. We also incurred a low single-digit percentage growth impact from successful customer migration to empower subscription agreements, which carry long-term recurring revenue benefits. Recurring revenues grew 9%, driven by 8% growth in service and 12% growth in chemistry.

We again saw fantastic customer adoption of our bioseparation columns which have been a vertical success in the market. Adjusted earnings per share grew 10% to $4.53, GAAP earnings per share were $3.77. For the full year, sales grew 7% on both a reported and constant currency basis. By end market, pharma grew 9%. Industrial grew 6%, while academic and government declined 1%.

In pharma, all regions delivered high single-digit growth or better, led by Asia, which grew low double digits. In Industrial, [ Waters division ] grew low double digits with broad-based double-digit strength across chemical analysis, food and environmental testing. This was partially offset by a 1% decline in TA division. In academic and government, the Americas and China grew mid-single digits, while Europe declined 5%. By region, Asia grew low teens while Americas and Europe grew mid-single digits. Within Asia, India grew high teens and China grew 9%. Our strength in China was driven by broad-based growth across pharma, industrial and [ ANG ]. This was supported by share gains in biotech and CDMOs, chemical and environmental workflows and ANG.

By product line, instrument sales grew 5%, led by high single-digit LC-MS growth. Recurring revenues grew 8% with 7% service growth and 12% chemistry growth. For the full year, adjusted earnings per share grew 11% to $13.13. On a GAAP basis, EPS was $10.76. Within the P&L, gross margin was 61.1% for the quarter and 59.3% for the full year, which was better than expected. Adjusted operating margin was 35.2% for the quarter and 30.5% for the year. This reflects the deliberate acceleration of strategic R&D investments in chemistry and informatics, along with the impact of regional sales mix and tariff surcharges. Our operating tax rate came in at 15.7% for both the quarter and the year. The full year rate includes approximately 50 basis points of discrete benefit related to a change in U.S. tax legislation enacted in 2025.

Turning to cash generation and the balance sheet. Free cash flow was $125 million in the quarter after funding $39 million of capital expenditures, and $15 million of transaction-related costs. For the full year, free cash flow totaled $677 million, after funding $113 million of capital expenditures, inclusive of tariff-related mitigation actions and $29 million of transaction-related costs. Our net debt position at the end of the year was $820 million.

Now I will share further commentary on our 2026 outlook and provide our first quarter guidance. We are executing well with a revitalized portfolio leveraging instrument replacement and benefiting from our idiosyncratic growth drivers. We expect this momentum to continue into 2026. As a prudent starting point, these dynamics support stand-alone full year 2026 organic constant currency revenue growth of 5.5% to 7%. We expect favorable foreign exchange translation to provide 0.5% tailwind to organic sales, which translates to organic reported revenue of $3.355 billion to $3.405 billion in 2026.

Turning to the acquired business contribution, following today's expected closing of the transaction, we expect the acquired Biosciences and Diagnostic Solutions businesses to contribute $3 billion of revenue in 2026. In setting this expectation, we have risk-adjusted the underlying growth assumptions, even though most of the headwinds that impacted the business in 2025 are already in the baseline as we enter 2026. Our guidance prudently assumes approximately 2.5% underlying constant currency growth for these businesses in 2026 on an owned period basis before any benefit from execution and pricing improvements or our organizational changes. In addition, we expect to realize approximately $50 million of revenue synergies in 2026, reflecting the initial contribution from the first wave of commercial excellence initiatives discussed earlier. Taken together, this results in a total reported 2026 revenue of $6.405 billion to $6.455 billion. These starting consumptions imply blended year-over-year constant currency growth of approximately 5.3% for the combined company in 2026.

From a profitability perspective, we expect to deliver an adjusted EBIT margin of 28.1% in 2026, consistent with our deal model. This reflects approximately 80 basis points of adjusted operating margin expansion at Waters on a stand-alone basis, consistent with our Investor Day algorithm to approximately 31.3%. An adjusted operating margin percentage of approximately 22.4% for Biosciences and Diagnostic Solutions, a $25 million contribution from the $50 million anticipated revenue synergies, and $55 million contribution from anticipated cost synergies.

Below the line, net interest expense is expected to be approximately $179 million and our full year tax rate is expected to be approximately 16.6%. From a share count perspective, our updated capital structure results in approximately 94.3 million diluted shares outstanding on a full year average basis in 2026. At closing, our new share count is 98.4 million shares. This translates to full year 2026 adjusted earnings per fully diluted share of $14.30 to $14.50, and represents 8.9% to 10.4% growth. It includes $0.10 of adjusted EPS accretion versus Water stand-alone non-GAAP EPS profile due to the transaction already before a first full year of ownership. It is important to note that quarterly EPS figures are not additive to the full year EPS due to a significant change in average shares outstanding between the first quarter and the remainder of the year.

For the first quarter of 2026, we are beginning the year with strong momentum across our core businesses. We expect stand-alone organic constant currency revenue growth of 7% to 9%. With tailwinds from favorable foreign exchange translation, the reported stand-alone revenue is expected to be approximately $718 million to $731 million.

Turning to the acquired business contribution. We expect the Biosciences and Diagnostic Solutions businesses to contribute $480 million of revenue in the partial first quarter of 2026. This calls for a low single-digit revenue decline. Quarterly rate trends reinforce our confidence in this outlook. Taken together, this results in a total reported first quarter 2026 revenue of $1.198 billion to $1.211 billion. For modeling purposes, first quarter average share count is expected to be $82 million and tax rate is expected to be consistent with our full year outlook. While the transaction is expected to be EPS accretive for the full year 2026, the first quarter will reflect the full burden of interest expense and the higher share count, with synergies beginning to ramp up in subsequent quarters. As a result, the first quarter adjusted earnings per fully diluted share is expected to be in the range of $2.25 to $2.35, which is flat to 4.4% growth. Embedded within this guide is stand-alone EPS of $2.50, or 10% growth versus prior year at midpoint.

With that, I will now hand the call back to Udit.

Thank you, Amol. So to summarize, with a revitalized core portfolio expanded high-growth adjacencies and tangible synergy levers now underway we are entering 2026 with strong momentum and a highly compelling growth outlook. Our growth outlook of 5.3% at midpoint for the combined company is appropriately prudent, yet industry-leading even before factoring in the full benefits of upcoming execution improvements, which we will now work decisively to implement. Within the P&L, we are confident in our ability to accelerate value creation as the year progresses. We look forward to updating you on our progress as we move through the year.

So with that, I will now turn the call back to Caspar.

Thanks, Udit. That concludes our prepared remarks. We are now happy to open the lines and take your questions.

[Operator Instructions] Our first question will come from Tycho Peterson with Jefferies.

Udit, I think the two things people really want to dig into here are obviously the BD results this morning and the numbers, obviously, have deteriorated relative to the original deal model. So maybe just talk a little bit about your take on the numbers this morning, particularly for the lagging parts of the portfolio, U.S. academic government, China, early-stage research on the BD side. And how do we think about the path to recovery there?

And then the second thing is instruments, right? And the Empower impact on that transition. I understand it's, call it, 250 basis point headwind this quarter. But how do we think about the go-forward P&L impact on instruments from this Empower transition?

So Tycho, thanks for the two questions. So let me start with the BD Diagnostic Solutions and Bioscience business first.

Look, several issues emerged in Q4 that impacted the growth of both of those businesses that were not fully known in Q3. And I'll let Amol describe those in a few minutes. But what is important is that all of these will now be present in a lower baseline for us in 2026 to basically help us deliver the 2.5%, which we think has several upsides.

Now this reminds me of Waters almost 5 years ago, right? You couple this with a host of innovative new products in both diagnostic solutions and in Bioscience across flow cytometry, as well as across the microbiology business and the molecular diagnostics business. You start at a fresh portfolio. And -- so we are now really squarely focused on, first, improving the operational execution, for instance, by implementing a deal desk for pricing discipline and discounting discipline, ensuring launch readiness of this fantastic portfolio, just like we did with Alliance iS and improving forecast accuracy to minimize surprises.

And equally, after months of detailed integration planning, we're now ready to deliver the synergies. Be it around instrument replacement, e-commerce or service attach. And look, I mean, the service attach was starting at a 40% number. And you've seen what we've already done in 2025 alone. So we're very confident to deliver the $50 million in revenue synergies and more. You add this to what a stand-alone guidance is and you end up with over 5%, close to 5.3% in at the midpoint of the guide for the combined business. So we're feeling pretty good about that industry-leading growth rate as we head into 2026.

Amol, do you want to comment on the dynamics of the two businesses in 2025?

Yes. I mean, look, coming into the fourth quarter, we were starting to see the [ DRG ] headwind in China. And then we knew Q4 had a higher baseline from the prior year IP onetime revenue, right? But then a couple of other things sort of crept in, which is a weaker flu season, coupled with challenges getting exemptions on shipments to China because of the government shutdown.

Now as we get into Q1, three out of the four are sort of behind us in terms of the baseline for the flu season, no IP issues in the baseline for the first quarter as well as, remember, the China export ban started at the beginning of the first quarter last year. So from a baseline point of view, it's pretty clean, except for the DRG issue, which will start to come in the baseline late Q3. And quarter-to-date trends give us a lot of confidence that where we are guiding, which is a low single-digit decline for Q1 is sort of a reasonable guide.

So now turning to your second question on instruments. Really happy with instruments performance. LC-MS grew high single digits again. And this is like through the year, every quarter has been high single digits to double digits for LC-MS with the same drivers, instrument replacement cycle still going strong, as well as the idiosyncratic growth drivers plus the new products. TA was a drag at a low single-digit percentage to the overall instrument number given the weakness in both the U.S. and Europe.

And -- what's great news is something that we've been telegraphing for a while is the transition of Empower from on-prem to subscription where several large pharma customers transitioned in Q4, and that was about a low single-digit headwind to the overall instrument number. So overall, LC-MS high single-digit growth. TA was a low single-digit percentage headwind just given the challenges in U.S. and Europe. And Empower really a wonderful transition that we told you that we will talk about it. We will talk about it in the rearview mirror.

Now as you look ahead into 2026, Q1 started off extremely well on the instrument side. The funnel is extremely strong. Orders grew faster than sales in Q4. So we feel very good about where we're starting. And the guide we have given for Q1 and the full year. And all the drivers are currently fully intact. And we've also accounted in the guidance that we've given for the Empower headwinds that we expect during the year as customers transition from the CapEx to a recurring revenue model. So all going according to plan and really happy with, especially the Empower transition that [indiscernible]

And it's a fantastic problem to have, right? Two of the top 5 pharmas converted. And I mean, Q1 [ funnel ] is strong, so we're not [indiscernible]

Your next question will come from Catherine Schulte with Baird.

Maybe first, just for the full year guide of 5.5% to 7% after starting at 7% to 9% in the first quarter [indiscernible] some deceleration for the balance of the year. Is that just prudence to start the year? Is it comp driven? Or are there some other dynamics we should be aware of?

So first on the full year guide, the 5.5% to 7%, Catherine. Look, our guidance philosophy has generally not changed, right? I mean, the lower end of the guide constitutes where we think instruments are going to end up and I'd given a lot of detail to Tycho's question on that front already. So we feel very good about where we're starting on the instrument side at 5.5%. And on the 7% at the top end of the guide, that is our recurring revenue, sort of, guidance for the year.

This basically again constitutes several upsides that we've not baked into the guide itself. I mean we've assumed that the academic and government drug discovery from our research segments don't recover. In China, we've assumed a mid-single-digit growth versus what we've done this year, which is about 9%. I mean, a fantastic growth in China, but we've assumed mid-single-digit and not included any sort of stimulus revenue. We've incorporated already the Empower headwinds from converting from CapEx to a recurring revenue. This does not include reshoring revenues. And finally, for the full year, we've assumed that chemistry is roughly 6% in our guide, while finishing the year at 12% in chemistry growth rates. So several areas to basically have risk on the upside. And so I feel pretty good about where we're starting with the guide.

On Q1, Amol, do you want to talk about the 7% to 9%?

Yes. I mean in general, the momentum coming into Q1 is really strong, and that coupled with 4 extra working days sort of supports our guide. And that then sort of derisks the remainder of the year.

Okay. Got it. And apologies if I missed it in your response to Tycho's question. But on -- for the outlook for the BD assets, any comment on pacing there? And maybe what we should expect from a fourth quarter exit rate for BD on the path to recovery?

Yes. I mean, look, we expect sort of a low single-digit decline in Q1 and then growth sort of gradually starting to ramp up. as we go through the remainder of the year as some of the headwind gets more and more rooted in the baseline, particularly as we enter Q3 and Q4 when the DRG headwind is in the baseline.

Yes. And Catherine, look, equally, you should know that we are squarely focused on improving the operational execution. And as I mentioned before, this is around ensuring that there is a forecast accuracy in the business. There is a pricing discipline, not just on setting the price but also on discounting, which impacts both the top and the bottom line, and we've done that successfully at Waters. And also ensuring that the launches for the new products that are coming through go extremely well and something we've done by targeting segmenting very precisely for our Alliance iS and TQ Absolute products.

And equally, we're squarely focused on taking all the work that's happened in integration planning, and implementing that throughout the year to increase momentum on the revenue synergy side. Instrument replacement service attach and e-commerce should contribute immediately. So feel very good about the starting point after a lot of planning.

Our next question will come from Jack Meehan with Nephron.

Udit, on BD, you talked a couple of times about setting up a deal desk for pricing. Can you talk about which product areas are in focus and how you think -- how you think that's been optimized in the past?

Yes. So look, I mean, almost 5 years ago, we set up the same process at Waters, and it has 2, maybe 3 parts. The first is a centralized examination of what the list is prices are, as well as what the discounting is, and that escalates all the way up to me as discounting requests come from the different regions. So we've -- basically, we take away the ability for regions and sales teams to discount. So any time there's a list price increase, the stick rate is much higher.

This is especially relevant for products in the instrument category. Now here, you have a couple of new products that have been launched across the Biosciences and diagnostics businesses. The most of all being the [indiscernible] as well as now the [ S7 and A7 ] that are coming up. And for instruments, it's extremely important to not sort of lose the pricing discipline as you negotiate the deals, it's pretty easy to sort of give away pricing on highly innovative products, if you're not disciplined.

And on the recurring revenue side, we see a benefit both on the service piece so that we are charging for installation. We're charging for spare parts in an appropriate way, but also on the reagent side, where there is no reason for BD to not command the same sort of price premium that our chemistry revenue does. These are highly differentiated dies and antibodies that only BD producers, and these are of the highest quality. So there is zero reason why there should be discounting there. So we expect those to immediately impact and those impact both the top line and the bottom line, Jack.

Great. And then for Amol, can you give us an update on the pro forma leverage for Waters and how you expect that to evolve over the year? And kind of similarly, what is the guide for interest expense assumed for any refinancing?

Yes. So I mean, look, we will be roughly at a net debt of somewhere around $4.6 billion, $4.7 billion, right? And that would translate to roughly around 2.4x net debt to EBITDA, slightly more than what we announced because the deal closed earlier than what we had anticipated, which is great. And then we expect to be below 2x within sort of 18 months time frame. And then interest expense on a pro forma basis is about $179 million for 2026. .

Our next question will come from Doug Schenkel with Wolfe.

I actually just have one topic I'd like to cover, just on the synergy targets. I think your initial year 1 guidance assumes you cut 5% to 6% of the acquired businesses OpEx, assuming I have that math right? So I guess one question would be, do I have that math right? And if so, recognizing this is on day 1, and I think it's about twice what you previously outlined. What's driving this increase? And recognizing this is a pretty big number to start, I'm just wondering how you're thinking about potential upside to that year 1 target, given what seems to be strong momentum in identifying opportunities in the early going?

Doug. So look, I mean, our underwriting model assumed roughly 4% -- 4%, 4.5% of the pro forma cost base of Waters stand-alone plus the acquired business. And that had certain elements baked into it, like site consolidations, like sort of commercial and technology. And also, it did not include certain elements in the underwriting. When you compare and contrast it versus deals of this size, you typically see sort of 6% number. What Udit [indiscernible] achieved at [ Sigma Millipore ] was more like 8% number. We haven't baked in that level of targets in our underwriting because, one, we want to give ourselves some space. And we to -- for a deal of this size, there's always skeletons that you find and gives this room to cover for that.

If you now look at our guide, we're pretty much on track to deliver exactly what we said in our deal announcement. And we feel really good that after having done a lot of work over the last several months we are well on track to deliver our deal announcement commitments.

Your next question will come from Matt Larew with William Blair.

Sticking with BD, maybe thinking about the revenue synergy side, the results from the most recent quarter called out a number of issues, but maybe even over the last couple of years, might be suggestive of a business in need of commercial investment to improve execution. How do you think about the level of investment needed for the business long term, and how that perhaps works with the idea of the EBIT contribution you're hoping to get from revenue synergies?

So Matt, that's a really good question and something that we invested a lot of time in doing the integration planning. Now you take -- you take what I mentioned on the pricing discipline or launch readiness. We have central teams that we will now deploy into the businesses -- into the acquired businesses to implement this pricing discipline and train the teams locally, and eventually leave a few of these people behind to manage that on a day-to-day basis. Something we've done in the past as well. So the pricing discipline that we've seen at Waters, or TA, or clinical in the past will now be applied to the new divisions in the same way. So there will be commercial investment to ensure operational excellence, be it on launch readiness, be it on pricing.

And equally, we've looked at separately the amount of resources that are going after the launches. Be it the FXI on the microbiology business, be it BD Core, where it is enhancing HPV testing across the overall population. Or on the flow cytometry side, we've taken specialists and move them into the different businesses equally investing further in commercial readiness. So we feel pretty good about the resources we've put against improving the execution rhythm, but also getting a stronger uptake of the new products.

Your next question will come from Casey Woodring with JPMorgan.

So another strong quarter of chemistry performance. Curious if you could just unpack that for us. How much of that was price? How much was new product contribution in bioseparations? As a follow-up on pricing, can you just elaborate -- you had talked about, I think it was 100 to 200 basis points of pricing improvement with a high stick rate in that business. So how do you see pricing evolving here in chemistry within that 6%, 2026 guidance framework?

Let me start with this, Casey, and Amol will elaborate. Look, very happy with what we're seeing on chemistry, 12% growth for the year. Seeing really nice momentum already in Q1 with the innovation. And I mean, basically, it's a mix of what you just mentioned earlier. These are highly innovative products that command a price premium.

From a pipeline and product perspective, as I mentioned in the prepared remarks, we've built on the MaxPeak Premier technology, which is -- which targets [indiscernible] surfaces of all types. With SEC columns, with oligonucleotides, with [ slalom ] chromatography, and sort of the newest kid on the block is the affinity chromatography where we're attaching antibodies to particles. And here, super excited about what's going to come from BD with the capability in biology and antibody preparation, so we can prepare specific antibodies to conjugate to our particle.

So we feel very good about what's been happening and a nice momentum already at the start of the year. Amol, do you want to talk about pricing?

Yes. I mean on chemistry alone Casey, as we had outlined chemistry, we are able to get an amazing stick rate on our list price increases. So for like-for-like SKU, like-for-like geography, we are generating close to 400, 450 basis points on chemistry. On the overall portfolio basis, we're generating about 200 basis points of like-for-like SKU, like-for-like geography. That doesn't include upsell, and that's sort of running ahead of what we outlined at our Investor Day.

But more critically, that's a significant opportunity that lies ahead of us for BD. Remember, because Waters back pre COVID was 50-ish basis points of year-over-year price and now we are consistently delivering 200 basis points plus. And BD is exactly that, right? Like historically, they've done somewhere between 40 to 50 basis points and a meaningful opportunity ahead of us to reapply our blueprint that has been so successful.

Your next question will come from Puneet Souda with Leerink.

If I could circle back to an earlier question around the conservatism you're taking in the acquired assets growth. Obviously, those numbers are lower versus the expectations you had earlier. I understand that you're baking in pricing and KPI discipline that you're going to bring about. But you are in markets that are different to what pharma QA/QC have been.

So maybe just -- I would love to understand if you could, how much of a cushion there is in these numbers? How adjusted are they? If you could give us a sense, because I think that's the #1 question we're getting from investors as to the prudence you're baking in for the acquired portfolio.

So let me start, and then Amol will give you the parts. Look, I mean, we're not baking in just to sort of correct the question itself. We're not baking in the pricing improvements, or the deal desk and the launch readiness into the numbers. Amol, do you want to describe the details?

Yes. I mean, look, we are baking in primarily the headwind from China [indiscernible] And at this point, it's only prudent to sort of take that in. And we are also baking in some continued slowness coming out of other elements that are associated with China, or the academic and government market.

But again, when you look at our own water stand-alone U.S. [ A&G ] performance, it's tale of [ two worlds ], right? So there is a clear meaningful upside. If we can reapply our success to some of these parts, like what we've done in China, like what we've done with U.S. A&G. But at the beginning of the year, right out of the gate, we want to be prudent.

Got it. That's helpful. And then was there any contribution from extra selling days in Q1 that you're contemplating?

So I mean, our Q1 guide reflects 4 extra working days.

Your next question will come from Subu Nambi with Guggenheim.

What does operating margin progression look like this year with the addition to BD? What prudence is in those risk-adjusted assumption given it's a cleaner base?

Yes. Look, I mean, as we came into fourth quarter, we said we have few strategic R&D investments that could accelerate growth, particularly in bioseparations and informatics, and you're seeing the results of that growth on our top line. So we took the opportunity to accelerate some of those investments without changing our long-term margin on algorithm, right? So coming into 2026, we're back to 31.3%, which we feel really good about. And the BD Biosciences and Diagnostic Solutions business is coming in at 22.4%. So net of revenue and cost synergies that allows us to deliver 28.1% margin, which is perfectly in line with how we announced the deal where we said, look, we'll expand the margin of the pro forma company from 27% to 32% over 5 years. And where we are coming in on 2026 is exactly in line with the lower 100 basis points in the first year.

This concludes the Q&A portion of the call. I will now hand it back to Udit.

Thank you. Look, I mean guys, thank you very much for your attention today. As we get into the new chapter for Waters, we're starting our guidance for 2026, with, again, an industry-leading growth for the pro forma business. Really coming out of the gate strong on operational execution and synergies with $55 million on cost and $50 million on revenue side, which yields 100 basis points of margin expansion already in year 1, and almost a 1% accretion in less than a year. So I feel very good about where we're starting. Thank you very much for your support and look forward to talking to you again.

All right. Great. Welcome to JPMorgan Healthcare Conference. I'm Casey Woodring from the Life Science Tools and Diagnostics team. Pleased to be joined by Waters' CEO, Udit Batra.

Udit is going to go through the corporate presentation, and then we'll leave some time at the end for Q&A. Udit, all you.

Thank you, Casey, and good afternoon, everyone. Roughly five years ago, we started a transformation process that has led to an increase in our commercial strength, revitalization of innovation and entry into fast-growing adjacencies for Waters. And that has then allowed us to make the acquisition of BD's Bioscience and Diagnostics business.

So today, I'll talk to you a bit about how we're executing from a position of strength. With the acquisition of BD's Bioscience and Diagnostics business, how we see the next few years for value creation for our corporation. And finally, I'll give you a bit of a hint on what's to come from a strategic and financial perspective over the next few years.

So let's start. For those of you who are not familiar with the Waters story, this chart is new. Basically, on the left-hand side, you see that we start with significant unmet needs for our customers that invest roughly 10% of product sales in R&D to take highly complex instrumentation and turn them into systems that are useful and used in high-volume regulated applications. These systems have four parts. First, instruments, roughly 170,000 of those are placed across all our customers in regulated laboratories and other laboratories. The data from these instruments is then transmitted via regulated software or compliance software. And a prime example of that is our Empower software, which is used to submit data for about 80% of all novel medicines to FDA, NMPA and the EMA.

The third part of this ecosystem is our chemistry and consumables capabilities. We are a leader in customizing separation columns to the molecule that we're trying to separate, and we are the only company in the industry that has a full control on the value chain. That gives assurance to our customers that they have no lot-to-lot variability, which is extremely important in quality control applications.

And finally, this whole wheel only works with our service team, which is roughly 1/3 of our overall revenue. Roughly 2,000 folks are in our service team with most of them with advanced degrees, many of them come from our customers. And the NPS scores that we receive are roughly 20% higher than the weighted average of all service industries. And so the NPS score is the highest across the industry. So a simple and repeatable business model that takes complex instrumentation, turns them into a simple system, yet sophisticated for application in highly regulated settings.

This business model, we've been applying in attractive volume-driven markets. And on the left-hand side of this chart is where we started back in 2020. These are our core markets. So we started with pharma QA/QC, late-stage drug development, food and environmental safety, chemical analysis, materials testing, in all roughly $11 billion in size, growing mid-single digit-ish where Waters grew slightly higher than that over the last 15, 20 years.

We then took our business model and we said, where else can we apply it where we could advance our growth, where we could accelerate our growth. And the first place, of course, to hunt is in the biologics space, which grows double digits, and there are two parts to this. First is bioseparations, basically orchestrating the separation of more and more complex biologics using the same column chemistry that we've perfected over many years.

Second, increasing and augmenting our existing portfolio of analytical instruments for all those that are applicable in biologics laboratories. So those are bioseparations and bioanalytical characterization.

Third is taking our LC mass spec capabilities into specialty diagnostics. And then lastly, taking our materials capabilities from our TA business and applying it to the battery testing arena. And that particular part of the market is roughly $7-ish billion, growing high single digits to low double digits. And in all, if you combine it, it's about a $19 billion, $20 billion TAM, growing mid- to high single digits. So taking this simple and repeatable business model and applying it across our core markets and entering faster-growing adjacencies.

Over the last five years, and I'll take you through the story. Our team has worked extremely hard to accelerate the benefits of pioneering science by regaining our commercial momentum, delivering pioneering innovation and entering faster-growing adjacencies. I'll take you through each one of these. We're nothing if we're not boring. You saw this chart five years ago on the left-hand side. These are the five execution initiatives that I talked about then and every year, we've given you an update. And there were five initiatives. The first one was instrument replacement. We had about a 13,000 instrument deficit that we needed to replace almost immediately. Over a two-year period, we basically added over $40 million in incremental sales just based on the instrument replacement initiative initially. And then now it's part of our commercial execution model at Waters.

Second, we focused on service attachment rate. Remember, I said we have about 170,000 instruments placed across laboratories around the globe. The service attachment rate was about 43% back in 2019. Today, it's about 54%. That's about 2.2% increase every single year in service attach.

Third, we said we want to sell more consumables through e-commerce channels. Five years ago, we sold roughly 20% of our columns through e-commerce. Today, that number is in excess of 45%. So roughly 5% increase every single year.

Number four is expanding into faster-growing contract organizations. Five years ago, this number was at 15% as a proportion of our total pharma business. Today, it's in excess of so an increase of roughly 10%, 12% over the last five years. And finally, as I said, we invest roughly 10% of product sales in R&D, and we had a burgeoning pipeline. We wanted to do it justice. So we launched an initiative to ensure that every launch had excellence associated with it. So these five initiatives have followed diligently -- we followed diligently over the last five years.

And now turning to the fifth one. We basically said, look, what can we do to advance innovation in the company? We pioneered innovation across our portfolio so that Waters has again gained podium position across each of our portfolios.

I just have three examples here. First is in the LC space, where Alliance iS is the leading instrument in the category. It reduces errors in the quality control space by 40%. It's in the second year of its launch, and it grew 270% versus last year, same time last year. The Xevo TQ Absolute is a quantitative mass spec that is used for PFAS testing. It is the most sensitive mass spec in the industry. In addition, it is the most robust, making it grow roughly 40% in the second -- in the third year of its launch. And the MaxPeak Premier Columns is the best story of all. It's now in the fifth year. These are bio-inert columns that are well suited for biologics characterization are growing year-on-year 35%. So in all of these areas where we compete, we have regained a podium position and set a new standard for innovation.

Number three, we wanted to build new vectors for growth, right? Remember, in the past, Waters was focused on small molecules and food and environmental testing. We wanted to enter faster-growing adjacencies. And here, on the left-hand side, I list three of them: bioanalytical characterization, bioseparations and taking LC mass spec into specialty diagnostics.

Bioanalytical characterization and bioseparations together form our focus on biologics and creating a biologics QC environment that mimics the simplicity of small molecules.

On bioanalytical characterization, we -- I just have picked two examples on this slide, one from the past and one from the present. This is -- the first one is the BioAccord instrument, which we launched back in 2019, 2020. We've taken that instrument. It was initially designed for QC laboratories. We've taken that into raw material testing, in process testing with a high degree of success. Second, we just recently launched our charge detection mass spec, which is basically suited for mega molecules. Basically think lipid nanoparticles, think AAVs, think antibody drug conjugates. It's one of a kind, and that's really helping us build our bioanalytical characterization portfolio organically.

Second, on the bioseparation side, this category of columns has grown 50% year-on-year. Started with our MaxPeak Premier Columns, which basically, as I mentioned on the previous slide, have grown 35%. And based on those bio-inert surfaces, we launched size exclusion chromatography aimed at large viral-like particles. Then we introduced slalom chromatography. I know this is -- I'm geeking out a little bit. This is exciting for me, and I hope it is -- at least some of it is memorable for you.

The second meaningful innovation was called slalom chromatography. Think slalom as you go down the hill while skiing. And this was especially designed for large oligonucleotides.

And the third and the most interesting one was affinity chromatography, where we've created customized columns that we can stick antibodies to allow separation for all sorts of large molecules, something that we're extremely excited about, and I'll talk about it a bit more as well.

From an inorganic standpoint, we made a couple of acquisitions to increase our portfolio of bioanalytical characterization equipment. We acquired Halo Labs for particle characterization and Wyatt Laboratories' light scattering portfolio to take it into quality control. So acceleration across adjacencies that, again, I started with about 5 years ago -- that I mentioned five years ago.

And on the right-hand side, you see Waters-specific growth drivers. We were also equally pragmatic as we saw growth drivers emerge, not the least of which is the GLP-1 testing domain, which will add roughly $30 million in incremental sales to Waters revenue in 2025. Roughly 95 basis points of accretion this year alone. PFAS testing adds 70 basis points or $20 million to the top line growth. And the third is generics, generics testing in India. India grows high teens for us, and that adds roughly $30 million to the top line or 95 basis points. And if you add all of that, that is over 250 basis points of accretion from these water-specific idiosyncratic growth drivers.

And for those of you who were at our Analyst Day, you see these numbers compare quite favorably to what we had presented back in March of 2025 as our target. So as I said, we're nothing if we're not boring, we say something and we go back and look at it and we deliver against it. And so I just wanted to show you the report card before we went on talking about the future. Now accelerating commercial momentum, launching new products, entering faster-growing adjacencies, of course, it leads to an industry-leading or best-in-class financial profile.

So, on the right-hand side, you see some facts. This is trailing 12 months of data across the life science tools space, scale players across the life science tools space. In the middle column, you see adjusted operating margin. I mean, for those of you who know the water story, we've always been a margin leader. We remain so, roughly 180 basis points higher than the next competitor. And then as you go down the list, you see a significant lead versus the rest of the industry. But what is more enduring is now we're a growth leader as well. For the last 12 months, we've grown roughly 8%. The next competitor is at 5%. If you take a weighted average across, we're 3x faster than the rest of the industry. So quite a nice report card, which, of course, leads to a double-digit EPS growth that you see on the right-hand side. So a strong focus in transforming the company that has led to quite nice financial results.

And so before Casey asked me in the Q&A, what 2026 looks like, you should expect more of the same. Basically, from a growth perspective, our replacement cycle is in its middle innings. On a six-year basis, on a six-year CAGR, it's still in the low single-digit growth. So it's still well below our average 5% to 6% growth for instruments over a certain period of time. Second, our idiosyncratic growth drivers, GLP-1 testing, PFAS testing, generics in India continue to be very strong and should contribute equally or nicely in 2026. And then you see two new rows at the bottom of this chart. The first one is biologics. This is bioseparations, bioanalytical characterization, both of which combined should add on to the commitment that we have made on the other idiosyncratic growth drivers. And finally, informatics. We have roughly a $300 million informatics business. anchored in our Empower software, which I mentioned earlier. We expect this to grow double digits over the next few years as we move from on-prem to subscription models, add value with new applications that our customers can use that are cloud native and add on a whole bunch of portfolio of instruments that are compatible with Empower. So in all, these five growth drivers, water-specific growth drivers should add roughly 200 basis points at least to our top line growth.

So I think you'll agree with me that Waters is in a reasonably strong position at this point in time, which, of course, gave us the confidence to acquire BD's Diagnostics and Biosciences business. And I want to talk about the value creation that's ahead of us for the next few years on the basis of that business.

Let's start with just looking at the Bioscience and Diagnostics business of Becton, Dickinson first. It's a $3.3 billion business, which grew roughly 5% CAGR from 2019 to 2024, which compares favorably to the rest of the industry. It's a well-established portfolio of brands with a large installed base, a pretty deep sales channel. When you look at the revenue itself, roughly 80% of it recurs every year. And on the right-hand side at the bottom, you see the geographic footprint. Close to 50% of the business is in Americas, slightly higher than what Waters' footprint is. When you go to Europe, it's roughly 30% of the overall turnover, which is similar to Waters. And Asia Pacific and China, a bit underweighted versus Waters, roughly at 20%, right? So balanced geographic footprint, 80% recurring revenue.

On the right-hand side, you see the two business units. The first one is Biosciences, which is roughly $1.5 billion in revenue. Here, BD command's leadership position with flow cytometers and specific and flow-specific antibodies. Roughly 50% of the customers are in high-volume applications like Waters, in clinical diagnostics, in elucidating the endpoints for clinical studies. The rest of the 50% serves pharma R&D, drug discovery, biotech and academia and government. And then there's roughly a 2% of the business is focused on single-cell multiomics.

The second business unit is the Diagnostic Solutions business unit. It's roughly $1.8 billion in size. 2/3 of that business is a microbiology business where BD has created that category several years ago and has leading brands like BACTEC and Phoenix, which basically are focused on reducing hospital-acquired infections and combating antimicrobial resistance. 25%, 26% of the business is focused on molecular diagnostics with the BD MAX platform, which is the only open LDT platform for PCR testing in the industry, growing double digits over the last several years. And the BD COR platform, which is a high throughput automated platform, which is now setting the standard for HPV testing and now is benefiting from guidance that the HHS has issued for home collection for HPV testing, which should have a serious impact on cervical cancer. And then the smallest portion of this business is about $100 million point-of-care business.

So, in all, a $3.3 billion business, growing mid-single digits with a lot of vectors for growth going forward. 80% of the business is recurs every year, and 80% of it is also focused on iconic brands.

Let me now talk a bit about the combination of the two Waters and Becton, Dickinson. And I want to break this up into two parts. First, I want to talk strategically on how the acquisition allows us to accelerate our journey even further into high-growth adjacencies. And then I'll talk a bit about the synergies and the immediate uplift that we should see already in 2026.

So, first, on flow cytometry, BD Bioscience. Remember, I said we want to create an analytical laboratory in large -- for large molecules that mimics the simplicity and the compliance that you find for small molecules. And there are two parts to this. First, we need to be able to separate and purify all sorts of large molecules. This is the bioseparations portfolio that you see on the left-hand side. Waters has already built a very strong position in that area. That business grows roughly 50% year-on-year. And we were on the hunt for specific antibodies to continue to improve our portfolio for affinity chromatography. Roughly 12 to 15 of our programs will immediately get accelerated, and we've validated that during integration planning, will immediately get accelerated with access to the wide range of antibodies that BD manufactures.

On the right-hand side, you see bioanalytical characterization. The laboratory of the future for biologics will look like small molecules only if we can have all these instruments be compatible with a compliant software like Empower. We've already traversed that journey for HPLC with UV detection, for mass detection for capillary electrophoresis, for multi-angle light scattering with Wyatt, and now we intend to do the same with flow cytometry. And so that in the future, when customers want to characterize complex large molecules, they can do it in the laboratory, both from a chemistry standpoint, from a physics standpoint, but also from a binding to assess the binding of these large molecules on cell. This is especially important given the guidance that the FDA has recently issued for analytical equivalents of biosimilars as opposed to biological equivalent. So this is quite an important tool to have in armamentarium.

Why molecular diagnostics? As I said before, we've been on a journey to take LC-MS into diagnostics. It's -- we've got a small entrepreneurial business, roughly $265 million in sales, which has been growing every year, high single digits to low double digits, really performing well. We've increased the number of analytes that are available for therapeutic drug monitoring for endocrinology, but we are limited in its -- we are limited by the commercial infrastructure and the service infrastructure we have. With BD, we acquire a much larger commercial and service infrastructure that immediately accelerates the growth of this business. Second, we also get access to globally relevant regulatory and medical affairs capabilities as well as automation, which again should automate these laboratories and allow LC-MS to continue to grow faster. So significant value creation ahead for molecular diagnostics or for LC-MS using the capabilities that we acquired from BD.

Why microbiology? Now this is 2/3 of the diagnostics business. It is extra credit. Basically, this is not underwritten in the deal model. And you see significant benefit both on the revenue side and on the cost side. Let me start on the revenue side. If you just traverse your eye to the left-hand side of this chart, what you find is we currently -- or BD currently has a competitor's MALDI-TOF mass spec that they use for microbial identification. Waters is a leader in mass spectrometry, and we intend to replace the competitor's mass spec with our own. This should yield at least $100 million in top line accretion over the next few years. Second, while BD defined the category of microbiology for hospitals, it had not entered with the same workflow in pharma QC as well as industrial testing, areas where Waters has a significant infrastructure and expertise, and we intend to take this workflow of microbiology into those segments, leading to about a $50 million upside. So significant upside over the next few years from these two Waters-specific levers.

And then on the right-hand side, you see efficiency improvements. The gross margin of the microbiology business is roughly 1,100 basis points lower than our nearest competitor. If you adjust for product mix, there's a 700 basis points gap between the gross margin of the competitor and ours. We intend to close that gap by, of course, implementing more disciplined pricing that we see at Waters already. Second, we want to basically build a more closed system where our products have preference. And then finally, with the improvement of the organization, we expect to add another 300 basis points. So, in all, over the next few years, we expect to claw back or close the gap between us and the competitor on gross margin. So across the portfolio, across flow cytometry, molecular diagnostics and microbiology, we see Waters-specific strategic drivers that should help strengthen our business for many, many years to come.

Let me now turn to the financials to the synergies. And there are two parts, of course, cost synergies and revenue. So let me start with cost. Traverse by to the bottom of the chart, we've signed up for roughly $200 million of cost synergies over the next three years. When you compare this to what some of us were part of in the EMD Millipore and Sigma-Aldrich merger, that number was roughly 8% of the combined cost base. We've signed up for roughly 5% of the combined cost base. If you adjust for that, we should be well above $300 million in cost synergies alone.

Now if I take you a little bit into the details, the cost synergies are divided into three parts: manufacturing and supply chain, commercial and service and R&D and G&A. The first two buckets are roughly $75 million to $80 million each, and the R&D, G&A is roughly $45 million. Now in 2026, we expect the overhead reduction in manufacturing, in G&A functions, in commercial to immediately hit and the direct and indirect procurement initiatives to also be accretive immediately in 2026. So cost synergies, we think there is quite a bit of room to overachieve, plus we expect to hit the ground running in 2026 when the deal closes.

Turning now to revenue synergies. There are three buckets: commercial excellence, so application of Waters is commercial excellence levers that I talked about earlier. Second, entry into higher-growth adjacencies or strengthening our position into higher growth adjacencies; and third, cross-selling. Let me talk about the second and the third bucket. I'll spend a little bit more time on commercial excellence on the next page. On high-growth adjacencies, roughly $115 million of revenue synergies is expected across the three adjacencies I mentioned earlier. For bioanalytical characterization, we intend to take flow cytometers, the FACSLyric flow cytometer that BD has into many more process development labs and QC labs and eventually make it compatible with Empower, adding roughly $40 million in top line accretion at the end of the fifth year. Same with bioseparations with -- as I mentioned earlier, there's about 12 to 15 programs that have been stranded in the Waters portfolio that will immediately get a benefit from access to a much larger antibody portfolio at BD. And third, as I mentioned earlier, LC-MS and diagnostics, with a wider commercial infrastructure and capabilities in regulatory and automation, we should be able to accelerate the journey there as well, roughly adding $40 million in overall accretion to our revenue.

On cross-selling, BD has a much stronger infrastructure in commercial infrastructure in academic and government labs, in drug discovery, in biotech, where Waters is not present as strongly. We expect to take our LC-MS portfolio and the rest of our portfolio into these laboratories with BD's commercial infrastructure. So that's high-growth adjacencies and cross-selling.

Let me now turn to commercial excellence. These should sound familiar, instrument replacement, service plan attach and e-commerce. BD has roughly 22,000 instruments across flow and diagnostics that are due for replacement. The number at Waters back in 2020 was 13,000. Remember, I said earlier, in two years alone, we added roughly $43 million in incremental sales just due to the replacement initiative. We've signed up for $20 million here by the end of year five. So less than half the revenue accretion in more than double the time. So there is room for overachievement here, and that's roughly 100 incremental units every single year.

Service plan attachment. Remember, we said for Waters, we took the service plan attachment from 43% to 54% over a five-year period, roughly 2.2% accretion every single year. Here, we have signed up for roughly 1% accretion every single year, yielding $20 million by the end of year five. And on e-commerce, we intend to take the 20% number of consumables sold through e-commerce to close to 14%, which is 4% increase every single year. At Waters, we've done 5%. So we've perfected or we've improved our ability to execute these commercial levers, and now we intend to apply them to BD with quite a bit of room for overachievement. So we feel pretty good about where we are on the application of these commercial initiatives. So we're executing from a position of strength. I've laid out what we expect from a value creation perspective with a combination of BD and Waters over the next five years.

Let me now turn to the strategic and financial perspective over the next five years. From a strategic perspective, it's a bit of a complex chart, but let me sort of walk you through it. Our business model is in the middle. So instruments, informatics, consumables and service in compliant high-volume applications, right?

So that's our capability. Back -- start at 12:00 o'clock, we started with small molecules back in 2020. We had some strength in food and environmental testing, which we've been leveraging with PFAS testing. That's at 2:00 o'clock. Turn to between 3:00 o'clock and 5:00 o'clock. We moved decisively into large molecule pharma. We started with BioAccord, added CDMS to it. Now we have the BD flow cytometry and antibody business.

Turn between 5:00 o'clock and 6:00 o'clock. It's the clinical diagnostics business. This is the molecular diagnostics plus LC-MS business. Not only do we have our portfolio from Waters, now we bring in BD MAX and BD COR and their software to the portfolio. Turn to 7:00 o'clock, there's the microbiology business, one that BD created the category for with BD Synapsys, BACTEC, Phoenix and Kiestra leading brands. And then now between 7:00 o'clock and 9:00 o'clock is our TA business. We've led materials characterization for many, many years. We've taken that into the double-digit growth arena of battery testing. And finally, at 10:00 o'clock, 11:00 o'clock, you see in-process analytical testing, taking the tools that we use in quality control and in manufacturing to the manufacturing suite itself. And there are three -- at least three examples where we've had a lot of success recently with our patrol system for GLP-1 testing, our light scattering instruments for polysaccharide testing and our BioAccord instrumentation for clone selection.

So across -- this is sort of the layout of our portfolio. It started with -- if you traverse your eye from 12:00 o'clock all the way back to 12 o'clock, it started with a mid-single-digit growth end market to now you see in green, low double-digit, mid-single-digit plus and double-digit grower. So really a decisive move of the portfolio into higher growth end markets. So that's our strategy on the page. And as you think about Waters of the future and capital allocation, this chart should help you sort of ground yourself.

Financially, what does that look like? I mean it's the same layout I showed earlier for 2025. Basically, from a revenue perspective, we've underwritten 7% growth CAGR over the next 5 years. When you look at sell-side reports, our peer average is roughly 4-ish percent. The margin expansion, which yields -- and we've signed up for a margin expansion of roughly 500 basis points, which again compares favorably to the peer group. And that all then, of course, leads to a mid-teen EPS growth, which is not so shabby as we look ahead.

So, let me finish with where I started. Waters is indeed executing from a position of strength, which allowed us to make the acquisition of BD's Bioscience and Diagnostics business and should lead yet again to an industry-leading financial outlook over the future. Thank you for your attention.

Super helpful overview. I think you nailed it my first question is on 2026. So you haven't provided guidance at this point, but you just said to expect more of the same. So can you just elaborate on that? What type of framework should investors be using when thinking about this upcoming year for Waters?

Firstly, thank you. And more of the same. So we'll provide formal guidance when we finish the year and share Q4 results. But you should think about it, as I mentioned in the prepared remarks, you should basically on the top line, just simply be thinking about an instrument replacement cycle that's in its mid-innings. So the 5-, 6-year CAGR is still at the low single-digit level. So a lot of room to sort of add to that. And then you can add the idiosyncratic growth drivers, right? So GLP-1 testing, PFAS testing, generics in India, we added biologics and Empower growth to it, so roughly 200 basis points of accretion from that. And then the new products like CDMS adding on.

So similar sort of frame going forward as we've seen. And we will guide when we issue the Q4 earnings. And as we usually do, we get constructive as the year goes along.

And before we dig into the specifics on the business, I wanted to just bring up reshoring. Where do you see Waters opportunity there, both in terms of the total addressable market and then Waters specific potential revenue opportunity? And any sort of color you have around the potential timing of when we could start seeing.

Look, I mean, it's always seductive to get too quantitative when you have qualitative trends. I mean we are not shy of issuing targets and sort of beating them. But in this particular case, let me just start with the facts, right? We know that there's roughly a $350 billion to $400 billion CapEx that is generally committed by our customers. We also know from customer conversations that they will start to sort of impact our portfolio probably at the end of '26, sometime in '27. We know that Waters wins more than it loses in greenfield opportunities. We've shown that with the relative growth rates -- our relative growth rates versus the rest of the industry already. But what we don't know is the magnitude, right? And I would caution against being in a rush, right? Let's just wait, get more quantitation on this, and there's ample time in quantifying the upside.

The other interesting side effect of the timing is that you might see several years of high single-digit instrument growth, right? So let me explain. Our instrument replacement cycle will likely taper off sometime in 2027, when the reshoring CapEx should pick up. And then by the time that starts to taper off, we'll have another replacement starting from instruments that we placed back in 2021 and 2022. So, in a strange way, you might see a high single-digit growth of instruments for a significant period of time.

Okay. That's helpful. You just touched on instruments, but I'd like to touch on chemistry. Year-to-date, chemistry has grown 11% as of 3Q, which is above the historical growth rate for that business. You touched on several growth drivers in the presentation, driving that recent outperformance, price, volume growth across molecules, new product launches and bioseparations, for example. So can you elaborate on which of these drivers you expect to remain a tailwind to your chemistry business in 2026 and how you're thinking about the long term?

Chemistry is a gift that keeps on giving, right? So we have columns that were spec back in the 1970s that are still used, right? So once you spec in a column, it doesn't change unless the molecule is withdrawn from the market, right? So think of chemistry as an annuity, right? And it's a high gross margin. There's a pricing resilience, especially if you have innovative products. And from an innovation standpoint, our bioseparations portfolio has grown roughly 50%, starting with the Bioinert MaxPeak Premier Columns, which have grown 35%. On top of that, we built our size exclusion chromatography, which is target to sort of targeted towards LNPs and AAVs. And then we moved to slalom chromatography for oligonucleotides. And the most recent development is our affinity chromatography columns, which are customizable for any type of biologic.

So you give us a biologic, and we will work with you to try and figure out what antibody binds to it and then conjugate it to columns that you can purchase, right? It's fantastic. And it's rather foolproof. So once you sort of have it tagged along, you can create a large pipeline of columns.

So we think this will continue to add growth. Now of course, I mean, we grew 11% year-to-date in chemistry, historical growth rates sort of roughly 7% to 8% I wouldn't expect that to continue forever. We've seen benefits of innovation that came last year. But there is no reason to believe that chemistry cannot reverse a high single-digit to low double-digit domain once all of this portfolio starts to get embedded.

Okay. I want to hit on BACTEC. So I think a lot of the investor focus has been the targets that you've laid out, cost synergies and revenue synergies. You've straightlined both in terms of what you're expecting for -- in each year. Curious what you view as most actionable in 2026 on both the cost and revenue side and where potential areas of upside or opportunities to pull forward some of those synergy time lines forward?

No, I think -- I mean, we laid out the report card or at least the report card that you should hold us to pretty openly, right? From a cost perspective, you should expect the overhead reduction or G&A initiatives to hit already in 2026. At least the actions to be taken as fast as possible in 2026. indirect and direct procurement to hit already in 2026. So those should add immediately. I won't quantify that beyond what we've already quantified for 2026 in the past. Let the deal close, and we'll have a lot more to talk about it. Second, on the revenue side, we've spent a ton of time during integration planning, sort of validating the synergies and getting teams together to see where we can immediately see growth.

I talked about the commercial growth drivers, instrument replacement, e-commerce, service attach, things that we know how to do. We want to apply them to the larger portfolio, and we expect that to add value immediately. Cross-selling across LC-MS, across flow cytometry in PD, in process development, we expect that to add value rather immediately. So we feel quite good about what we have signed up for.

I won't say more at this stage. Let the integration planning finish and let the deal close, and then we can look back in the rearview mirror and see what's happened.

Okay. Maybe one more question on BACTEC and to the extent that you can talk about this is just the China piece for the legacy BACTEC business. Just talk about the exposure there, how they're exposed to the reimbursement dynamics in the region, pretty volatile as you've seen from your peers. So just the thought process around how you're going to handle that.

About 11% of BD's business is focused on China. I mean your focus is more on the diagnostics -- your question is more on the diagnostics side, where there is no molecular diagnostics business in China. It's mostly microbiology. And the microbiology business is very different compared to the other reimbursement pressures that you're seeing. It's basically two large competitors serving most of the hospitals. We do see pressure or BD does see pressure in reducing the utilization of bottles in hospitals as a result of the cost pressures. But we've seen that started to subside already towards the end of the last quarter.

Okay. Got you. Looks like we have 30 seconds here. Maybe as you look across the business, you have an exciting integration plan ahead of you. Maybe what are you most excited for in 2026 and the year ahead?

Lots, maintaining a focus on a few things and not sort of getting excited with every opportunity that comes. But I mean, look, it's our dream to build the biologics QC of the future. With bioseparations and bioanalytical characterization, I think we will play a huge role in ensuring that biosimilars get market access way faster than they have done in the past with analytical characterization tools that we've developed.

So I'm super excited about that and super excited about the microbiology business. But definitely, if I had to pick one, something that we set out to do five years ago, we did it organically as best as we could. And now we have a much larger portfolio and a much stronger position to be able to accelerate that journey.

All right. Sounds good. We'll have to leave it there. Thank you, everybody, for joining us. Udit. Thank you.

Thank you.

Enjoy the rest of the conference.

Okay. Thank you, everybody. We're going to kick it off. I'm Tycho Peterson from Life Science team. I'm pleased to have Udit with me from Waters. Welcome.

Maybe we could -- I think, if we were sitting here a year ago, we'd be talking about the replacement cycle starting to kick off. We're a year into it. Maybe just talk a little bit about some of the trends you saw in 3Q, orders obviously outpacing revenues. So, talk about the momentum, the durability and how the pharma discussions are going now.

Yes. Firstly, thank you for having me here, Tycho, and it's great to be here. I'm not surprised the first question was on the replacement cycle. Look, it started about a year ago, as you said. Our instrument growth rate, this is LC-MS, remains in the high single-digit arena. And it's got three drivers.

The first one is the instrument replacement cycle. We're still, I would say, probably not even midway through it, given that it's only been a year, and several of the customer segments have not even started to replace, right?

So if you -- and another way to look at it is, to look at a 5-, 6-year CAGR. When you look at a 6-year CAGR, we're still in the low single digits for LC-MS growth, right? So that's quite an important indicator. So, we're far away from finishing the instrument replacement cycle. The funnels are good. So, the trends are very good there.

The second driver were our idiosyncratic growth drivers, right? GLP-1 testing, the revenues doubled there. PFAS testing still 30% order growth. India growing again, high teens. So, everything that we had said sort of on track from the Investor Day last year.

And then third and most enduring and the most important thing is our -- the products that we're developing are meeting significant unmet needs in the market, and they have incredible traction, right? So be it Alliance iS and you had the opportunity yesterday to visit our site, all the mass spec portfolio, including TQ Absolute XR for PFAS testing, for DMPK, and now CDMS is coming up for next year. Chemistry is doing extremely well.

And then finally, informatics is at the table as well. So innovation across the board is contributing nicely. So, see good trends and nothing, sort of, is changing. In fact, a couple of new growth drivers have been added.

Now yes, if you just look at pharma itself, there are two or three segments that are still not strong, right? CROs are starting to stabilize. Biotech, early-stage discovery is still sort of flattish, still declining a little bit. And China generics, which is a significant part of our China business is still declining, right? So, you have two or three segments in pharma that have not yet recovered.

And chemistry was up 13%, up double digits, low double digits year-to-date. You are well above the kind of pre-COVID run rate of typically 6%, 7%. So given new product cadence, is this the new norm?

Not 11%, not 13%, but trending in the right direction. Look, let's break it down a little bit, right? So, we started to invest in bioseparations 5 years ago quite significantly. Over 70% of our R&D spend in our columns is now towards biologic applications, right? So, that's a significant change from the past.

And over the last 3 to 4 years, you've seen very significant innovations come to the market. First was -- were the MaxPeak Premier columns. This is a bio-inert surface, which is relevant for all large molecules, right? So large molecules are sticky. They stick to many surfaces. We created a bio-inert surface. And that then allowed us to build on it.

We've launched SEC columns for size exclusion. The columns that did extremely well versus last year and this is where you saw incredible growth where some of the SEC columns, which are highly targeted, but also our protein A columns. Here we basically took antibodies and attach them to particles. And this is a very significant new platform. These products have grown faster than any products that we've launched in the history of Waters. And so, that's why you saw a spike in the growth, 13% this quarter, 11% year-to-date.

Over the mid- to long term, I would expect our chemistry growth rate to go from 6% to 7% to high single digits, just given the amount of -- given the fraction of portfolio that is now targeted towards large molecules, which grow faster.

Another way to think about it is the bioseparations -- the bioprocessing market. There, the consumables are proportional to biologics, biologics production, right? And the same thing will be true for bioseparations. So, that's another way to sort of anchor the logic.

And so yes, the answer to your question, it's a long answer to your question. I wanted to give you all the caveats, so you don't start modeling 11% already. But over time, we expect the growth rate in chemistry to be high single digits to low double digits for sure.

And with BD coming in, it unlocks several programs rather quickly. And so, you will probably see some of these spikes go up and down, and the slope of the line will continue to rise.

And then, we're going to hit on BD in a minute, but just maybe touch on the pricing opportunity on large molecule because that's very good for columns as well.

Yes. It's -- I mean, in general, chemistry, our pricing is pretty sticky, right? So generally 5%, 100% stick rate, and that's 20% of our business, so you get 200 basis points -- 100 basis points just like that.

With biologics, the pricing opportunity is more significant if you're solving very difficult problems, be it in separating viral vectors, be it in separating antibody drug conjugates, be it in separating vaccines, right? So the pricing opportunity there is much more significant and much stickier than small molecules as well.

I want to go back to the pharma performance and your comments earlier, trends are up 11% in the third quarter on pharma. You had a tougher comp. America, up low double, China up significantly. Maybe just touch a little bit on -- it doesn't seem like there's any slowdown in the cycle ahead of some of these CapEx developments here in the U.S.? And then on CROs, touch on that as well because that biotech funding that's driving that?

You promised no three questions in one. So -- but there are three questions in this one. So let's just take pharma and break it down a little bit. So double-digit growth in pharma yet again. U.S. and Europe, driven by the replacement cycle, the idiosyncratic growth drivers largely GLP-1 testing and DMPK in this case, and new products, right? So that's relevant for U.S. and Europe, and I went through that earlier as well. And this is large pharma and where the replacement cycle is driving the growth as well.

You go to China. In China, the growth is driven by CDMOs, who are supporting the local biotech industry. And the local -- basically, the local biotech industry has rejuvenated quite dramatically, roughly 1/3 of the global in-licensing comes from China now, right? And that's a dual benefit for us. We have significant share in global CDMOs that are Chinese based. And as they transfer the -- as the biotechs gets sold or as the molecules get out-licensed, the CDMOs keep the molecule and they transfer the process from China to ex China facilities, right? So it's a long-term benefit for us as well. But in the short term, China has grown double digits in pharma, largely on the back of CDMO growth. Branded generics is still pretty slow, right, still negative.

And then if you go to India, India is driven by genetics, right? So high teens growth, the generics demand remains pretty high, right? So different drivers geographically, so it's not a monolith, and it requires different ways to compete in the different markets.

What was your second and third question?

Just the comments on CRO on the third quarter call and what's driving that? Is that all biotech funding or...

Yes. So, CRO is still pretty slow, Tycho, right? I mean -- but stabilized. It's not declining anymore, and we start to see a bit more stability in the biotech industry, even in the U.S. as a customer. But I wouldn't call it a victory yet, right? So, it's not going back to 2021, 2022, but it's starting to stabilize. It's not declining as rapidly anymore.

Any tailwind from anti-involution in China in terms of kind of bidding and regulatory quality pharmas in there?

Not in pharma. I think that's mostly relevant for the industrial markets. And even there, we don't see much of it, right? If anything, the need for high-quality producers is even higher as you start looking at different parts of the market, so no real impact.

Innovation, I want to spend a minute on. It was great to see some of that at your site yesterday. Talk a little bit about the CDMS opportunity? How are you thinking about that market?

It's fantastic. It's rare that -- I'm an engineer by training, so I get excited about these kinds of things. It's fair that you see something that looks so shabby when you start with it. It looked like my PhD experiments, where on the side of a wall we had the CDMS instrument with high-voltage signs and pumps. And I think you saw the previous version of it as well. And for those of you who have access to our Q3 earnings, there was a picture in there, and that's a real picture, from 2022.

And customers had already started to -- started to look for that technology because it uses 100x less sample. It's 10x faster than analytical ultracentrifugation. It's nondestructive, it's a fantastic technology. And even in that pre-beta version, you could analyze large molecules and their molecular weight and their mass to charge ratio. It's not important what those characteristics are. It's just very difficult to measure them with small amounts of sample. And so this meets a very significant unmet need relevant for 40% of the biologics pipeline.

And over the last 2 to 3 years, and you saw our Wilmslow site yesterday, the team there converted this Frankenstein experiment into a sleek-looking box that sits on a bench top and is able to analyze 40% of these large molecules and give you a mass and a mass to charge ratio, which is not possible to do with any other instrument.

We have sized it and it's very difficult to size something like this when you're creating a new category, right? So it's a new category that's been created. The current techniques roughly captured $350 million sales annually. They grow high single digits to double digits. We think chances are we will take most of it over the next 5 to 10 years.

I suspect others will come up with similar technologies as well. But over the next 5 years, I mean, the ambitions are pretty significant. So, I won't say more than that. Let's look at the facts as they roll out. Let's look at the customer adoption, and we'll share more as we go further, but it's a very significant opportunity. And it's a fantastic instrument.

As I said, it's rare in your career. When you see an unmet need, you see a prototype instrument and you in-license it and within a reasonable period of time, it becomes a product that customers want. And the first shipment actually, by the way, occurred to a customer in China, right? So it's global demand, and it's just a fantastic product.

Maybe we could shift over to BD and curious thoughts on their 3Q results and how did that track relative to your own internal model?

I think -- look, I mean, it's an interesting question and one that we get a lot. One thing I would tell you is we don't run the business today. So whatever I say is with hesitation and also with not a ton of confidence, because we are not dug into everything, right? But that said, it's going according to our model, according to our plan, pluses and minuses, right? So the plus is being that the FACSDiscover S8, as I spoke to several customers, small pharma, academia, large pharma, universally, this is the best product in the market.

And since it was launched, there's been a funding slowdown. So there's a lot of pent-up demand, right? And that started to pick up, especially in the U.S. and in Europe. So that's an upside, while on the diagnostics side in microbiology, BioMérieux reported as well, they were a bit slower as was BD's business.

So puts and takes, but by and large, within error bars of what we had modeled. And don't expect it to be much different in the guidance either, right? So as I said, we are spending now more time doing integration planning, as opposed to going back to the model and saying, what did we get it? What do we get wrong? Right now, my entire focus is on day 1 planning, day 100 planning. So everybody who comes into the new company has a boss and has a seat and they go to a desk, they actually have a laptop. So we need to make sure that happens. So when the lights turn on, everybody's desktop turns on.

Second, we're taking what we talked about with you externally as well on the synergies. We've broken them down into roughly 400 initiatives with individual owners, and those are now being populated, right? So that's where the time is spent, and I'm enjoying that a lot.

Maybe just touch on some of the innovation there too, new flow, new back tech. Talk a little bit about how you're thinking about those in the next year.

So, I think, I mean it's difficult to sort of take a wide portfolio and talk about everything, but let's pick three to four, right? So the FACSDiscover S8 is a flow cytometer that basically measures 50 parameters and has an imaging technology with it. It's the only one in the industry. So KOLs and key customers can't wait to get their hands on it.

Second, the simpler version of it is going to be launched in 2026, that is relevant for cell therapy and clinical use, right? So there's a pipeline of products that are coming on that front.

Second is the FXI, which is the incubator for microbiology. It is a product that's been in the pipeline for a while for BD. It's frankly speaking, they've been a bit slower than the only competitor who has a product there and the product is going to get launched in Q1, Q2 next year and slowly going to get rolled out across the globe, and there's roughly 20,000 of those instruments that need to be replaced. Right? So something that we know how to do at Waters, and we feel very good that we'll be able to accelerate that.

So, those are two very significant innovations. The third one is BD COR. This is basically HPV testing. It's a high-throughput HPV testing, molecular high-throughput testing clinical diagnostic tool. And it is the only one with home collection, especially in the U.S. So, once that's been approved, we expect that to grow rather rapidly. So these are three pretty significant new platforms that are getting launched. And feel very good about what we're going to be able to do to get them moving.

Anywhere you've been most surprised on the integration planning front? You announced a deal in July, you'll close the end of March. So you have a long kind of runway here to plan it out.

Yes. I think more positive surprises than negative. Right? Significant opportunity on the microbiology workflow. Now there's an unmet need there to do rapid identification of microbes and determine the antibiotic that is needed to kill it, right?

So, the workflow itself has a lot of improvements that one can bring. But equally, as we looked at where Waters can immediately add value. The first place is to take that workflow into QA/QC in sterile testing of pharmaceuticals, right? That's roughly a $300 million market, growing double digits. BioMérieux has most of that market, and we think we can enter that with our commercial footprint.

And second is the MALDI-TOF that currently is sourced from a competitor. We have our own prototypes. It's already existing at Water. So there are three different work streams already in play to try and replace that over a certain period of time. So pretty excited about what we're seeing there.

So I would say, learning more, not negative surprises, but more positive surprises on what else we can do. And then, of course, the market dynamics is the market dynamics, right? So academia, et cetera, a bit slower than one would have imagined early on, but nothing dramatic.

I want to make sure we spend some time on software, because that was certainly something we focused on, on the visit yesterday. And you've talked about the super highway for Empower, you've put it on light scattering technology from Wyatt now. Talk a little bit about the road map there and how you think about it? And we put a $1 billion target...

Yes, I'll leave it to you to set public targets. Look, it's just to sort of set the current context. It's a $300 million business. And Empower is used to submit 80% -- the dossiers for 80% of QA/QC data for 80% of the drugs that are filed to the FDA, EMA and NMPA. So it's a very significant part of Waters' portfolio but also significant part of QA/QC for the pharma industry, right?

There are three areas where we are trying to add value, right? The first is to add other instruments to the Empower super highway as we call it. So today in the bioanalytical lab, not many instruments are compatible with Empower, right? So basically, we took multi-angle light scattering and made it compatible with Empower in the past. We've done capillary electrophoresis. Mass spec is in progress. LC has already been done T.he next step would be flow cytometry, right? So that's the first piece of the initiative.

The second is adding -- today, roughly 450,000 users have access to Empower. So imagine how much data exists in our customers databases, both on instruments and on the product. Both of those can be mined for insights, right? So we're basically building apps that access that data and give customers utilization data, give customers data on integration of peak, so they can have better anomaly detection. And in some cases, we've seen customers who used to have 90 out of 100 errors, now have 5 out of 100 errors in first-time integrations, right? So really significant advancement that customers are deriving value from.

So second initiative is basically launching new applications just using the existing data that we have access to. And the third and the most important one is changing the commercial model from what is called an on-prem model where a customer pays for a -- pays capital on day 1 and then has charged a service fee to maintain the software. The challenge with that sort of model is that, if you sell 500 licenses to a customer, they can easily substitute one user for another, and we found a few customers. In fact, one who had bought 500 licenses but had 1,000 users, right?

So, there is no chance to go back and inspect what's happening. What we've decided to do is move towards a subscription model, meaning each individual user is an individual unique subscriber, each instrument is a unique subscriber. So, any time now you change the instrument version, you have to pay up. Any time you change the user, you have pay up, right? And basically, you go from, say, $1 and then $0.20 for service all the way through and covering all upgrades for Empower now to a $0.35 or $0.40 per subscriber charge in perpetuity, right? So that's a significant change in the commercial model.

And we've had quite a bit of success with small to medium pharma already. They don't have large networks of instruments. They have transitioned and most customers prefer a non-CapEx model. They like it in their OpEx. So it's much easier for them to manage. We are in late-stage conversations with two very large pharma companies where it could be a very significant outlay.

Now so, if you add all that up, it's not unreasonable to think that the Empower business could be doubled in the next 5 years and to your target probably in a 10-year time frame. Yes. So it's -- because you're adding bioanalytical instruments, that's equally -- that is just about the same size of small molecules. The subscription model gives you a revenue uplift and so do the application. So you've put the target out there, but it's not unreasonable.

We gave you 10 to 15 years. Is your win rate in large molecule comparable to small molecule? I mean, it's been dominant for a small molecule. I mean, does that competitive advantage translate?

I think it depends in the area, right? So, where you have a unique value proposition, so for chemistry for sure, right? I mean, chemistry, each time, I think it's each time we have a head-to-head with anyone I think we usually win. So, if you're at the table because our chemistry and engineering teams usually customize for the user, right? So, for instance, one customer wanted to reduce the pore size in these SEC columns and the commercially available one was 250 angstroms, our guys built up 125 angstroms -- sorry, 125-micron pore size SEC column. So, the customization allows us to win a lot of share.

So, it depends in the area. Now where you have a unique value proposition like flow, like multi-angle light scattering, the win rates are pretty significant, right? So when you think about in-line testing, multi-angle light scattering compatible with Empower, BioAccord connected to bioreactors are two areas that are also starting to gain traction. And this was after the MFN deals were starting to be signed. Basically, pharma companies have started to become a little bit more relaxed about their CapEx even in R&D, right? And that has allowed them to buy these instruments.

There's another bucket for you. We kind of call it idiosyncratic growth drivers, right? It's PFAS. It's GLP. Talk about how these markets, I guess, have evolved relative to expectation. And if we're sitting here a year or 2 years from now, are there new ones that are popping up?

Very early days on PFAS, right? It's grown 40% again year-to-date of a $55 million or $56 million base from last year. We had signed up for half of that. The market is growing half of that rate. So, ahead of target on PFAS testing. The unmet needs are still pretty significant. The TQ Absolute XR wins more than it loses, given its sensitivity and there, I think you probably saw it in Wilmslow as well, instead of having to service the instrument after 2 weeks, you can now service it after 20 weeks, just the enhancement that was made recently on that particular product.

GLP-1 testing revenue, think of it in three different dimensions: the columns. We are specked into the two largest GLP-1 providers, we are specked into the late-stage oral compound, we are specked into generics. So you can see on the GLP-1 testing, on the columns, on instruments, on in-line testing, it's a very significant share there. And that revenue doubled from last year, right?

And India, in our model at the Investor Day, we had said 70 to 100 basis points of accretive -- accretion on our baseline growth. It's been growing well ahead of that. That was a mid-teens growth. We've been growing high teens with India.

So, all three going in the right direction. I think at some point, you'll see these get into the baseline. And at that point, the new initiatives with the BD acquisition, with bioanalytical, bioseparations, and LC-MS in diagnostics will start to kick in and create the sustainable growth rate to be at a higher level.

Great. Maybe in the last minute, and Amol is not here, so I can push you on '26. I think 6% to 8% is kind of the framework on the top line. Talk a little bit about some of the other dynamics that you can for next year.

I mean, the setup is good, right? The growth drivers remain the same, right? So the replacement cycle is still in its, as I said, middle innings. The idiosyncratic growth drivers, we just went through new products. Now you add -- you have Alliance iS, TQ Absolute XR, you have the chemistry that we sort of saw benefits already in this past quarter, add on -- add to that informatics, there will be some significant releases next year.

On that front, CDMS will start to pick up. BioAccord and multi-angle light scattering on innovation are starting to catch up on the biologics side. So, feel very good about the setup on the business, right? So, I won't give you a number, but the setup is very good.

Great. We're out of time. I'll leave it at that. Thanks.

Thank you. Thank you, Tycho.

Welcome to the Waters Corporation Third Quarter 2025 Financial Results Conference Call. [Operator Instructions]. This call is being recorded. If anyone has any objections, please disconnect at this time. It is now my pleasure to turn the call over to Mr. Caspar Tudor, Head of Investor Relations. Please go ahead, sir.

Thank you, Leila, and good morning, everyone. Welcome to Waters Corporation's Third Quarter Earnings Call. Joining me today are Dr. Udit Batra, our President and Chief Executive Officer; and Amol Chaubal, our Senior Vice President and Chief Financial Officer.

Before we begin, I will cover the cautionary language. In this conference call, we will make forward-looking statements regarding future events or future financial performance of the company. Additionally, we will comment on the expected timing for completion of Water's pending combination with the Biosciences and Diagnostic Solutions business, of Becton Dickenson & Company as well as the expected financial and operational impacts of this combination on borders. These statements are only our present expectations based on information available to us as of today. As well as the forecast and assumptions of Water's management and are subject to risks and uncertainties, many of which are outside of Water's control.

Actual events or results may differ materially from the statements made on today's call. Please see the risk factors included within our Form 10-K, our Form 10-Qs or other SEC filings and the cautionary language included in this morning's earnings release. During today's call, we will refer to certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP measures are attached to our earnings release and in the appendix of the slide presentation accompanying today's call. Both are available on the Investor Relations section of our website.

Unless stated otherwise, references to quarterly results increasing or decreasing are in comparison to the third quarter of fiscal year 2024. In addition, unless stated otherwise, all year-over-year revenue growth rates and ranges given on today's call are on a comparable constant currency basis.

Finally, we do not intend to update our guidance predictions or projections, except as part of a scheduling a regularly scheduled earnings release or as otherwise required by law. On today's call, Udit will begin by covering our key messages for the quarter. Amol will then take you through our results and updated guidance in more detail, then we will open the phone line up for questions.

With that, I'd like to turn the call over to Udit.

Thank you, Casper, and good morning, everyone. Let me begin by saying, it is a true privilege to be on this journey with such dedicated and talented colleagues. As I reflect on my 5-year anniversary at Waters, I'm filled with gratitude.

Over these years, our team has consistently delivered on our commitments and strengthened the foundation of this company. Today, we celebrate another quarter of outstanding commercial momentum. We marked another breakthrough innovation with Xevo CDMS, the next generation of mass spectrometry and prepared to combine with BD's Bioscience and Diagnostic Solutions business, ushering in an exciting new era for Waters.

Now turning to our third quarter results. We are pleased to report another excellent quarter with top and bottom line results exceeding the high end of our guidance. This performance reflects the combined positive impact of innovation and execution, along with clear benefits from our strategic expansion into high-growth areas. It also reflects the dedication and hard work of our teams whose focus on customers, science and operational excellence continues to power Water's success.

We achieved strong results in the third quarter. Sales grew 8% as reported and 8% in constant currency. Instruments grew 6%, led by high single-digit growth in our LC/MS portfolio. Recurring revenue grew 9%, driven by 7% service growth and 13% chemistry growth. We grew non-GAAP earnings per share by 16% to $3.40, which was $0.20 above the midpoint of our guidance. A year ago, we signaled the start of a new instrument replacement cycle. Since then, sales activity has surged and our momentum has continued to build. We see meaningful runway ahead as customers progress through the multiyear process of replacing their aged instrument fleets. Instrument growth is currently tracking at a low single-digit CAGR versus 2019, reflecting steady mean reversion toward the long-term historical rate of 5%.

Beyond replacement activity, customers are increasingly choosing Waters for new capacity investments, setting us up well for the years ahead. Our idiosyncratic growth drivers, GLP-1 testing, PFAS testing and India generics continue to perform very well. At the same time, our innovative products are also solving clear unmet needs in bioanalytical characterization and gaining adoption. As reported, instrument sales grew 11% quarter-over-quarter, representing the largest third quarter ramp in our company's history outside of the 2020 COVID year, with orders once again exceeding shipments. The strong sequential performance underscores the strong momentum in our business. Year-over-year, Alliance IS sales grew over 30% in as the customer adoption of our flagship HPLC product remains a clear success.

Xevo TQ Absolute platforms grew 30%, with continued strength bolstered by the launch of the new Xevo TQ Absolute XR earlier this year. GLP-1 testing-related revenue more than doubled, reflecting continued wins in development and manufacturing settings in the Americas and Europe, along with expanding demand from genetic semaglutide manufacturing build-outs in India. PFAS growth remains robust with orders growing approximately 30%, similar to last quarter. We saw strength across all major regions, highlighted by strong demand in Japan as labs prepare for new drinking water regulations and continued momentum from U.S. federal, state and municipal labs.

Our India team once again delivered excellent performance with revenue up high teens. This was driven by strong demand from genetics manufacturers and CDMOs as we continue to benefit from volume growth trends tied to the ongoing patent cliff of blockbuster drugs. Further enhancing our core performance are the unique capabilities we've built to address unmet needs in large molecule workflows. We are seeing clear progress in bioseparations and bioanalytical characterization reflecting the success of our deliberate long-term strategy and the investments we've made, both organically and through our acquisition of Wyatt.

In bioanalytical characterization, we saw strong growth of multi-angle light scattering instruments in pharma QA/QC applications as large pharma began new waves of instrument purchasing in quality labs. This was enabled by the recent launch of Empower onto wired light scattering platforms. BioCode system sales also saw strong growth, underscoring the sustained momentum and expanding adoption of this platform in the bioprocessing domain as customers increasingly standardize on its proven performance and ease of use in routine large molecule workflows.

In the quarter, chemistry grew 13%, and fueled by the positive market reception of our newly launched SEC and Affinity bioseparation columns with strength that more than offset pull-forward dynamics from the second quarter. Bioseparations grew more than 20% with small molecule applications growing 10%. 5 years ago, Waters Max peak premier columns set a new standard of performance in reverse phase separations across both small and large molecule pharmaceutical applications.

Today, this high-performance surface technology remains the benchmark for customers seeking the clearest peaks, maximum reproducibility and highest confidence in results. All of this helps accelerate analytical decisions across discovery, development and manufacturing. Since 2023, we have made further advances in combining the bio inert benefits of Max peak Premier with our novel innovations in other chromatography techniques such as size exclusion chromatography and affinity chromatography, both critical to bioseparations. These products have an immediate success serving pre and post clinical development and manufacturing applications of novel large molecule therapeutics. New products launched over the past 5 years grew approximately 50% in the quarter and have been a key contributor to our 11% year-to-date chemistry growth. By end market, our results were led by pharma which grew 11%, driven by double-digit growth in Americas and Asia and high single-digit growth in Europe.

In Asia, we saw particularly strong growth in China, where pharma sales grew by more than 20%, reflecting continued spending improvement amongst Chinese CDMOs and biotech customers. In our Industrial segment, sales grew mid-single digits, with the TA division returning to positive growth sooner than expected. In the Academic and Government segment, sales grew 1%, driven by stimulus tender wins in China and a lower-than-expected decline in the United States, where our teams delivered strong results at customers' fiscal year-end.

Our growth strategy is delivering, driving exceptional performance and positioning us for sustained momentum ahead. At the same time, the external environment continues to improve across our key end markets, supported by more stable global trade conditions and a clearer policy backdrop for our pharma customers.

With our strong third quarter performance, we are raising our full year 2025 guidance. We now expect constant currency sales growth in the range of 6.7% to 7.3%. This represents a 7% midpoint, which is an increase from our prior outlook. We are also raising our adjusted earnings per share guidance and now expect a range of $13.05 to $13.15, which represents double-digit growth.

Looking ahead to 2026, we are well positioned to build on our momentum. The same growth drivers that have powered our performance this year, instrument replacement, higher service attachment and increased product adoption through e-commerce will remain key contributors. We also expect the innovation tied to our idiosyncratic growth drivers and our unique offerings within bio separations and bioanalytical characterizations to deliver a sustained contribution to our growth. This puts us in a fantastic position to deliver strong performance again in 2026, further reinforcing our outlook for next year, we are launching a wave of new products that build on our recent success. At the same time, our pending combination with BD's Biosciences and Diagnostic Solutions business, represents a powerful catalyst for near-term synergy realization and long-term value creation. A few weeks ago, we launched our Xevo charge detection mass spectrometer, which marks a new era in mass spectrometry. It is a perfect example of how our team takes complex technology that meet clear unmet needs and turns them into simple and easy-to-use instruments without losing the sophistication of the measurement.

Xevo CDMS represents a transformative breakthrough in bioanalytical characterization. It enables direct high-resolution measurement of largest and most complex therapeutics in high-volume applications. The system is a major advancement offering faster results, easier operation and requiring much smaller sample sizes and traditional methods such as ultracentrifugation.

It provides process development and lot release characterization insights up to 10x faster while requiring 1% of the sample volume accelerating what was previously required days of analysis. This launch is relevant for 40% of the large molecule pharmaceutical pipeline and serves a total [indiscernible] approximately $350 million, which is growing between high single digits and low double digits. We also have exciting updates ahead for Empower, which has long set the standard for compliant informatics and pharmaceutical applications. It is used in more than 80% of novel drug approvals by the FDA, EMA and China's NMPA. Over the last several years, we have steadily expanded the value and reach of Empower, adding new detectors to the platform.

Earlier this year, for example, we successfully launched multi-angle light scattering from our acquisition of [indiscernible] on to Empower. These advancements are helping us extend Empower's leadership from small molecule analysis into the faster-growing large molecule applications where biologics and complex modalities now represent more than half of the global pharma pipeline. Looking ahead, Empower will continue to evolve as a more complete panel for bioanalytical characterization across multiple techniques, including flow cytometry, creating a unified, compliant data environment for our customers' most advanced analytical workflows.

In 2026, we we will begin a significant release cadence introducing a series of premium features that will progressively evolve Empower into a modern, connected and more intelligent platform. These cloud-native features will leverage artificial intelligence and machine learning to reduce manual interventions, save analyst time and minimize compliance risks from human error, which are all key value drivers in QA/QC labs. They will also enhance instrument utilization and uptime through predictive maintenance and automated operational insights. The value add that these new features offer will answer our customers' unmet needs and will help accelerate our customers as transition from a perpetual license model to a subscription-based model where we are already seeing growing traction with several large pharma customers. This shift will unlock long-term growth accretion within informatics and deepen customer engagement across Waters' digital ecosystem.

Further development could expand the opportunity ahead in bioanalytical characterization came last week as the U.S. FDA issued new draft guidance aimed at modernizing and accelerating the development of biosimilar drugs. The proposed framework will reduce the need for routine comparative clinical efficacy studies and instead rely primarily on advanced analytical characterization. This could represent a meaningful shift towards analytical testing becoming the primary gatekeeper for biosimilar approval which has the potential to increase demand for analytical instruments and compliance-ready workflows such as our BioCore LCMS system, multi-angle light scattering and flow cytometry.

Taken together, these developments strengthen our confidence in the high-growth opportunity that exists in the years ahead across bio separations, bioanalytical characterization and large molecule compliant informatics. Now turning to our pending combination with BD's Bioscience and Diagnostic Solutions business. We have a compelling opportunity to create value for our shareholders and begin realizing year 1 synergies following completion of the transaction.

Our goal is to hit the ground running and quickly apply the same execution and operational discipline that has defined Waters over the past few years. Integration planning is well underway and progressing rapidly. We've hosted 2 highly energizing integration summits at our Milford headquarters, bringing together 120 leaders from both organizations to establish a unified vision. We have refined our pre-day 1, day 1 and day 100 master plans and achieved alignment on operationalization of transition service agreements in collaboration with the BD team.

And we are well on our way to readying our synergy delivery action plan, 6 big business unit work streams and 10 functional work streams are now fully mobilized and focused on day 1 readiness. We remain on track to complete the combination of BD's Biosciences and Diagnostic Solutions business with Waters Corporation around the end of the first quarter of calendar year 2026.

I will now turn the call over to Amol to cover our financial results in more detail and provide further details on our guidance.

Thank you, Udit, and good morning, everyone. In the third quarter, we delivered sales of $800 million up 8% as reported and 8% in constant currency. Momentum remained strong with as reported sales increasing 4% quarter-over-quarter, while orders continue to outpace shipments leading to backlog growth. By end market, pharma grew 11%. Industrial grew 4% and academic and government grew 1%.

In pharma, all major geographies grew high single digits or above led by low double-digit growth in the Americas and Asia. This trend reflects robust instrument replacement activity key wins in greenfield CapEx projects, such as those related to our idiosyncratic growth drivers and new instrument system deployment in bioanalytical characterization. We also saw significant market uptake on our new chemistry products such as those serving bioseparations which grew mid-double digits. In Industrial, Waters provision grew mid-single digits led by mid-teens growth in food and environmental testing where we facilitated demand has remained a key growth driver.

PA performed better than expected and returned to growth with sales up 2% as improving macro sentiment grow stronger customer spending. In academic and government, growth was led by China, which grew approximately 20% as we leveraged our local presence and new product innovation to capture stimulus tender opportunities. Meanwhile, the Americas saw a low single-digit decline as spending came in better than reflected in our assumptions. By region, Asia grew 13%, while Europe and the Americas, each grew 5%. In China, sales grew 12%, driven by double-digit growth in pharma and academic and government.

India grew in high teens, reflecting continued strength in pharma generics where we are benefiting from the ongoing patent cliff. By product line, instrument sales grew 6%, led by high single-digit growth in LC/MS systems, reflecting continued strong performance as we move beyond the first year of the instrument replacement cycle.

Recurring revenues grew 9% with service up 7% and chemistry up 13%. Our strong chemistry performance was driven by price optimization and volume growth in small and large molecule applications and new product introductions, which more than offset the pull-forward dynamics from the second quarter. Adjusted earnings per share were $3.40, representing 16% growth. GAAP earnings per share were $2.50.

Gross margin for the quarter was 59%, which was a 70 basis point sequential increase versus the prior quarter, reflecting normalization of tariff remediation costs. Adjusted operating margin was 30.3%. Our operating tax rate came in at approximately 14%. Free cash flow was $160 million after funding $25 million of capital expenditures and $14 million of transaction-related expenses. Our net debt stood at $948 million at the end of the quarter.

Now I will share further commentary on our full year outlook and provide our fourth quarter guidance. Our growth strategy is delivering, driving exceptional performance and positioning us for sustained momentum ahead. At the same time, the external environment continues to improve across our key end markets, supported by more stable global trade conditions and a clearer policy backdrop for our pharma customers.

With our strong third quarter performance, we are raising our full year 2025 constant currency sales growth guidance now to a 7% midpoint in the range of 6.7% to 7.3%. Net of currency translation, full year reported sales growth is now expected to be in a range of 6.5% to 7.1%. We expect full year 2025 gross margin to be approximately 59.2% above our prior outlook and adjusted operating margin is expected to be approximately 31%.

Below the line, we expect $36 million in net interest expense and average diluted share count of $59.7 million and tax rate of 16.5%. With these updates, we are raising our full year 2025 adjusted earnings per fully diluted share guidance to the range of $13.05 to $13.15. This is approximately 10% to 11% growth. This guidance incorporates the expected impact of the current tariff structure on our business including the recent increases in tariff rates since our last update.

Turning to the fourth quarter of 2025, we expect constant currency sales growth in the range of 5% to 7%. And Net of currency translation, reported sales growth is expected to be 5.2% to 7.2%. At the midpoint, this guidance assumes a 16% quarter-over-quarter increase in the reported sales between the third and the fourth quarter, prudently below the seasonal pattern we observed last year. We also have one additional day in the fourth quarter versus the prior year, representing roughly 100 basis points tailwind to recurring revenue sales growth. We anticipate our fourth quarter adjusted earnings per fully diluted share to be in the range of $4.45 and $4.55, which reflects a year-over-year growth of approximately 9% to 11%.

With that, I will now hand it back to Udit.

Thank you, Amol. So in summary, momentum in our business remains strong. We have continued to deliver high single-digit growth as we move into the second year of the instrument replacement cycle. -- driven by consistent execution and the positive impact of innovation across our portfolio.

Reflecting this trend, our raised full year -- full year 2025 outlook now calls for high single-digit sales growth and double-digit adjusted EPS growth at the midpoint, underscoring the success of our global teams delivering on our long-term growth strategy. Looking ahead, we will enter 2026 with a robust cadence of breakthrough product launches, expanding adoption in large molecule applications and an exciting opportunity to unlock meaningful near-term synergies and long-term value creation through our pending combination with BD's Bioscience and Diagnostic Solutions business.

I will now turn the call back to Casper.

Thanks, Udit. That concludes our prepared remarks. We are now happy to open the lines and take your questions.

[Operator Instructions] Our first question will come from Tycho Peterson with Jefferies.

Nice, nice quarter. I'd love to unpack the pharma strength to start. America is up low double digits, China, up over 20%. Can you maybe just provide a little more color on both those markets in the U.S., how much of this is on the back of the onco announcements? And how are you thinking about kind of year 2 of the replacement cycle -- and then durability of momentum in China, is this increased R&D investment? Is it a multinational activity? And how do you think about anti-evolution there? It seems like that could be a tailwind in China going forward. And then lastly, just on chemistry up double digits. Can you maybe just provide a little bit more color [indiscernible] what's driving that? Because you are tracking above historical growth trends.

Look, very happy with what we're seeing in pharma. It grew double digits again this quarter. And as you mentioned, the growth is across all regions. Starting with the Americas. Look, I mean, double-digit growth overall. But if you just take U.S. and Europe as a combination. I mean the growth was driven by the success of our replacement cycle in large pharma and equally the traction of our new products, right? I mean you'll note now Alliance IS grew -- grew 300% versus last year.

Xevo TQ Absolute start to enter the DMPK space, and that's benefiting the pharma growth in the U.S. and across Europe quite a bit. GLP-1 testing is doubled versus last year and increasingly our biologics characterization instruments as well as our bioseparations portfolio is doing extremely well with large pharma across U.S. and Europe. If you go to China, in China, same as last quarter, activities being driven by CDMOs supporting the local biotech industry. And again, here, our new product portfolio is doing extremely well, right? I mean these customers are supporting biotech customers who then have to transition many of these molecules globally, and they want the best characterization techniques, the best chemistry, and that's benefiting us quite a bit. and not to leave India out, I mean the India generics market continues to grow in the high teens.

Now that said, there are still pockets of low growth, right? Like we mentioned in the past, China generics pharma discovery pharma discovery and CROs are still a bit slower. So as those improve, the setup is extremely good as we go forward for pharma and as we look ahead. So great execution across U.S. and Europe and globally, great traction with new products and still some pending end markets or subsegments that are not yet flowing.

Now turning to your question on chemistry, right? I mean this is a real success story of our focus on innovation, especially in bioseparations. Like this quarter, we grew 13%. Year-to-date, the growth is 11%, and there is a significant contribution of our bioseparations portfolio, right? So we launched Max peak Premier roughly 5 years ago that created the bio inert surface category. And on top of that, we've been step-by-step launching new products targeted to different types of novel modalities and large molecules.

First came the SEC columns, basically helping us resolve large molecules that we can separate through porous particles. We launched affinity chromatography last year, again, with the Max Peak Premier as a base and that is growing really, really nicely.

Let me have Amol jump in just to sort of give you some help on the modeling as you think about this in the future and the contribution of new products.

Yes. And just to build on what did said, right? I mean, think of it this way. Our teams are pursuing critical customer unmet needs. So when they are able to solve those unmet needs, very quickly, the demand and the sales pickup on that new product and reach sort of $8 million a 10 million, right? And if you have 2 such launches in a year, you're quickly adding $20 million, $25 million in that year when it happens. And on a base of a little over $600 million of chemistry, that's like 300 basis points accretive in the year that happens.

And then think of it from a BD vantage point, right, like BD just unlock 8 to 12 projects that were stranded that gives us a very meaningful runway in the next 5 to 7 years to unlock this accretive growth through bioseparations.

Look, I mean, at the end, the success in pharma, the success in bioseparations or chemistry is all due to sort of a deliberate focus that we put a few years ago on launching products that meet unmet needs across our customer segments. And we're seeing fantastic uptake of these products.

Your next question will come from Jack Meehan with Nephron.

Pretty strong results here. I had 2 questions for you. The first is on the BV transaction. It sounds like there's a lot of efforts underway. I was curious your latest thoughts on the revenue synergies and confident to issue that and then my second question on is, last week, there was an FDA update around biosimilars for analytical assessments without CMS. Just curious if you could help us understand what that might mean orders.

Thank you, Jack, and I think your line was breaking up a little bit, but your first question was around BD, right? Look, a very busy few months since we last spoke. I've had the opportunity to visit several customers across Bioscience and microbiology.

Equally, we've had a lot of discussions with our future colleagues in workshops -- so let me just give you some color on both of those, and then I'll let Amol comment on the immediate impact of different types of synergies. Look, from a customer standpoint, the fax discover S8 and 8 are a significant advancement in the field of flow cytometry. I had the opportunity to visit academic customers. small pharma customers and large pharma customers. And now you couple this with a more stable CapEx environment going forward where customers are able to plan without many perturbations.

The CapEx, I mean we see a very significant opportunity there to increase the uptake of fax Discover, S8 and 8. I mean this was fantastic to see with the customers myself. On the microbiology side had an opportunity to visit automated and manual laboratories. Now to just illustrate the difference between the 2 in manual laboratories, you get hundreds of samples in a day and about 80 or so technicians will be in any laboratory basically doing a lot of these experiments manually. And if you compare that to an automated lab, you will need roughly 5 to 7 technicians to do the same throughput or even a higher throughput of experiments, right?

So significant savings. And to put that in perspective, BD's [indiscernible] platform has roughly 10% to 20% growth in Europe over the last couple of years, whereas in the U.S., the penetration is at a very low level. So we think there's a significant opportunity there as well.

So I'm thrilled to bits to see things that we had put on paper and really verify them with customers and meet new colleagues. Now in terms of integration planning. We've had roughly 120, 130 colleagues come to Milford our headquarters twice in the last few months. The last workshop really focused on day 0, day 1, day 100 planning.

So there is no, nothing lost in transition from 1 organization to another. And then we spend a significant amount of time taking the synergies that we had signed up for and elaborating the plans with milestones and targets and assigning those to individuals across the 2 organizations and take a significant amount of progress made on that front.

And I'll let Amol comment on which synergies will contribute rather quickly in the next year or so.

Yes. Just to build on what Udit said, right? I mean these 2 summits were fantastic. We got an opportunity to validate both our revenue synergy assumptions and cost synergy assumptions in a large group setting with leaders who will be responsible for delivering these synergies and working them out in the countries, in the market. And that gives us confidence that we will not only be accretive from an EPS point of view in the first 12 months, but also in the partial year that we will have in 2026, where we will get maybe 9 months in the year.

And I mean what hits the ground running day 1 are things like improving service plan attachment, deploying premium service plans to our LCMS customers getting into customers that we today don't serve with our LCMS in diagnostic offering, getting into DMPK labs getting flow and PCR into process development labs, where we have built strong channels across Biocad and light scattering and implementing our pricing discipline algorithm, which even in today's settings is delivering like-for-like SKU, like-for-like geography, 200 basis points of year-over-year increase.

So I mean just to build on that, really looking forward to bringing the execution focus and it's being received extremely well with our new colleagues and a sharp focus on unmet needs as we unlock many growth areas for the future.

Now to your question on biosimilars, really excited to see that the guidance is now guidance is now moving towards using analytical instruments and analytical testing instead of clinical studies to show equivalents between biosimilars and originators this could provide a significant upside as we go ahead. And if you go back a few years, we've talked about this. This is -- this and being able to substitute 1 1 tool for another without having to redo process development and redo manufacturing submissions is the impetus for creating our bioseparations and bioanalytical portfolio. So this plays right into the hands of our strategy. And I'm really excited, a bit cautious. I mean, to see how fast the ramp will be.

So I would not start modeling all biosimilars with bioanalytical characterization yet Jack. Let's look at one or 2 customers adopting it and then we'll go forward. But I'm very excited to see this.

Your next question will come from Puneet Souda with Leerink.

Yes Amol, First one on the 4Q guidance and then I have a broader follow-up. On 4Q, just wondering if you're expecting a budget flush in the fourth quarter. If there are any pull forwards in the third quarter that you saw you had a pull forward in 2Q in China, but you grew strongly again 13% in China, I believe. So wondering if you can clarify on the pull forwards. Or should we expect a normal seasonality in the fourth quarter? And fourth quarter contribution instruments versus chemistry, if you could elaborate?

So let me start, and then I'll pass over to Amol on the breakup. Look, we need I mean it's a very strong setup going into the fourth quarter, right? The drivers are the same instrument replacement cycle, idiosyncratic growth drivers, innovation, really kicking hard. So feel very good about what we are seeing going into the fourth quarter. I mean -- and as usual, we have maintained our guidance philosophy, right? So when you look at the full year guide, I mean, we basically said 7% at the midpoint, high single-digit growth, EPS double-digit growth.

That means that Q4 is at 5% to 7%, right? And when you take that math at the midpoint of the guidance, it's slightly less than a 16% ramp from Q3 to Q4, which is substantially lower than what we've seen on average for Waters, which is roughly 22% and even lower than what we saw last year, which was at 18%, right? So that gives us -- and it is the same philosophy as we've had through the year, we will look at it in the rearview mirror and claim success, but I can simply say, I mean, there is a significant amount of prudence built into what we have guided for Q4. Amol?

Yes, just to add to that, right, I mean, as we had outlined, the guidance is prudent 16% versus 18% last year, historical 22% ramp. And keep in mind, there's 1 extra day on the recurring revenue, which adds about 100 basis points. So the way it breaks down is chemistry, roughly 6% because still some working down of the Q2 pull forward, service about 8% because it has one extra day and then instruments at 5%, sort of aggregating all to 6% midpoint.

I'm sorry, I didn't address your pull-forward question. No pull forward at all, right? Orders grew more than sales this quarter, and we've built a healthy backlog. So feeling very good about the overall momentum that we see going forward.

Got it. Just a quick follow-up, if I may, on Empower. If you could outlined for us, obviously, a very important core product for execution in QA/QC for Waters. With the subscription-based model, how should we think about the incremental upside here versus the prior Empower model?

Yes. Look, Puneet, I mean really excited about what we're seeing from our software teams. And this empower innovation model or as we call it internally, the Empower super highway has 3 parts, right? I mean we want to take every analytical instrument that is used to characterize biologics and be compatible with Empower.

So when our customers choose to take it into QA/QC they have no reluctance, right? And you see that, as an example, with multi-angle light scattering on Empower, customers are moving that into QA/QC. You've already seen that with mass detection, capital press, and we intend to do the same with flow cytometry and down the line with PCR as well. So that's the first part. The second is then taking our large installed base that you just referred to. There's roughly 450,000 users of Empower globally, right? And it is the compliant informatic software of choice for our pharma customers. We intend to give them more value-added services with -- and applications with a cloud-ready software, right? So for instance, customers want to get utilization data. Our system monitoring software already provides that, provided you have your products on Empower.

Second, we're offering our customers a data viewer, which allows them to detect anomalies in their -- in different peaks allows them to do integrations much, much more smoothly just leveraging their own data through advanced machine learning algorithms. And finally, the data intelligence software, which is the most exciting allows regulators and customers to determine where an audit trail might have been -- where we would -- where you might have deviated from an audit trail electronically, so they can focus on the exact challenge that they need to address in compliance. And put this all together, this then really gives customers and impetus to go from a CapEx and a service model to a subscription-based model, and that has significant benefits. It's too early to start quantifying exactly what that is.

I can tell you that there are a significant number of customers who've already transitioned in small to midsize pharma. There are several large pharma customers, where we are in late-stage discussions and just to sort of give you an example, one customer transitioning their fleet across the globe can yield roughly low double-digit millions just very, very quickly in upside. So we'll start to quantify that as the runs come on the board like we usually do. But as you can intuitively see, this is a very significant opportunity.

Your next question will come from Casey Woodring with JPMorgan.

Great. have 2 here. The first is on TA. You said that business came back faster than expected. I think you had previously assumed would be down 5% in the second half, and you grew 2% here in 3Q. So maybe walk us through your latest expectations as we exit the year in -- and then on the instrument order funnel, you talked about orders exceeding shipments again in the quarter.

Maybe walk us through what you're seeing from an order funnel perspective. And I would be curious to hear your thoughts on the replacement cycle runway. You've historically said that the cycle usually lasts around 2 to 3 years. But just wondering if this current cycle could last longer, just given the strength that you've seen here, coupled with new product launches, the FDA update Jack referenced earlier and perhaps any sort of reshoring benefit?

Thanks, Casey. So quickly on TA, right? I mean the thing that was causing sort of the pain in Americas was largely driven by the volatility around tariffs with some of our large industrial customers. And as that is starting to stabilize, these customers are coming back to business and releasing capital for projects that were installed and then that, coupled with an interest rate outlook that is improving, opens projects that were stranded for last several quarters.

So in general, we feel good that the business is tracking towards a good direction. And in terms of the funnel and the order book, I mean, a lot of things are going well, right? In the sense you have large pharmas and CDMOs in middle of a replacement cycle. The innovation that we've put out in the market across both LC and MS is resonating and solving critical unmet need. And that is further than amplified by by analytical characterization and bio separations where we continue to make big headways.

So the funnel is pretty rich and strong. Now having said that, 3 customer groups are still on the sideline. CROs, biotechs and branded generics in China. We start to see CROs come into the mix as we come towards the end of the year, which is great because then they add to the replacement cycle as we get into 2026 and there is still a significant runway left on both large pharma and CDMOs that positions us severely well for the upcoming year. And then at some point, branded generics in China and drug discovery have to consider replacement because these instruments have aged far more than their typical useful life.

Excellent. Look, I mean, just maybe in belting on 2 points that Amol has covered. One, the replacement cycle. I mean, if you look at the 6-year CAGR, we're still in the low single digits on instruments. So there's a long way to go. And I think you mentioned reshoring. Look, the recent clarity on MFN, as you see large pharma negotiating with the government, really it's been a relief, right, across our customers and across our company because it allows you to plan a lot more systematically, right? And I would not underestimate the benefit of being able to do that, that then allows the customers to adopt. As I mentioned earlier, BD's track discover SA[indiscernible] Much more confidently. It allows them to adopt our new products much more confidently as CapEx gets released.

So we feel very good given that we have a differentiated portfolio that is meeting needs with the further clarity in the end markets. And that's sort of a side effect of the negotiations that have taken place on the MFN.

Your next question will come from Doug Schenkel with Wolfe.

Two questions. It was a really strong quarter. That said, when I look at our model, there's some interesting pacing dynamics. And I know you said there wasn't any pull forward or push out. But if I look at just our model and I think street models, you beat the quarter from a revenue standpoint, but you increased full year guidance by less than the magnitude of the beat Secondly, margins were light, but you assume a big jump in operating margin in Q4 more than previously expected.

And then tax rate was low in the quarter and really helped some of the EPS upside, but then you expect a big jump in tax rate I'm just wondering how much weight we should put on some of these puts and takes when it comes to timing dynamics as they run through the P&L? Like should we focus much on those? Or is the bigger thing just to in your opinion, kind of say like, hey, there's going to be puts and takes in any quarter, but if you look at the year as a whole, you're tracking ahead of plan top to bottom. So that's the first one. And then really building off of that. you have some really strong momentum heading into next year. The downside to that is the comps are difficult. I just want to make sure, as we sit here today, are you still comfortable with us modeling something like 6% to 8% core growth at the top line even with these comparisons given the strength and something like 50 to 100 basis points of margin expansion.

I mean, look, at the end of the day, you have to look at the full year, right? I mean there's always puts and takes in a given quarter, like for example, in -- we are running ahead of plan. So we had to sort of true up for the annual bonus payout to reflect that. And then there is also incremental commission associated with outperforming your plan that comes in. When it comes to tax, there is always timing of discrete items and when they show up and when they get trued up.

So on a full year basis, we're still at 16.5% on the tax rate. And as Udit outlined, I mean, we have tremendous growth catalysts out there for 2026. And if there is an opportunity to accelerate some of them or to derisk some of them, we will absolutely take it as long as it's within our guide and within our P&L. And we continue to do that as we come across investment opportunities that accelerate growth.

To answer your second question on next year. First, I'll tell you this year is not over, and we're laser-focused on delivering a fantastic year, high single-digit growth, double-digit EPS growth. I mean puts and takes and from 1 quarter to the other, notwithstanding, I mean, the full year is fantastic, fantastic performance.

2026, the setup is the same, Doug, as this year with incremental drivers from a more stable policy environment, especially across pharma the largest customer, stable environment also across academia as we start to go into next year. So a better -- even a better setup from an end market perspective. From waters, the setup is excellent, right? our instrument replacement cycle is still sort of in the mid innings. We are traversing at a low single-digit CAGR versus 2019. Idiosyncratic growth driver, GLP-1 testing, the revenues doubled this quarter versus last year, there's still a long runway to go as the volume keeps increasing and now you have some aglutide generics coming to the market. India is putting up really nice runs on the board with high-teens growth and as PFAS testing talk about innovation. I mean, our pipeline is doing extremely well. The move towards bioanalytical characterization bioseparations is paying off extremely well, as you saw in this quarter's results and year-to-date results and we expect that to continue next year. Now that's augmented further by strength in CDMS, which is a game-changing launch for large molecule mass spec -- you then have informatics building on top of it, with malls going into Empower in the instrument space. So there are several catalysts for next year that are not even there this year.

So we feel extremely good going into 2026 on our top line growth. Now as you know, we generally don't give specific guidance in Q3. We'll talk more about that than the year-ends and at Q4, but the setup is extremely good from an end market perspective, our execution perspective and how much traction all our new products have and that allows us to deliver the performance we're delivering in a dynamic environment.

Your next question will come from Dan Arias with Stifel.

Just did a follow-up on the biosimilar opportunity over the next few years. If you look at the revenue number for the drug sales over time, they move up nicely each year, 260 higher than this year. And then '27 and '28 move up pretty significantly as well.

Obviously, there was a pricing component there. So when you look under the cover, so to speak, to what extent do you see pill count increases underpinning that such that you can think about an incrementally larger opportunity being available to you each year because it looks good from a dollar standpoint, but I'm wondering what is the change for you when it comes to what matters most, which is obviously just the number of bills.

So look, I mean, Dan, that's a fantastic question. And it's exactly the right way to look at the biosimilars opportunity. You take any drug class. I mean you take oncology drugs or you take what you find is the penetration for these really advanced therapies that make a massive difference in a patient's life, the penetration is still extremely low, right? And some of that has to do with pricing and affordability. And when you are able to introduce more biosimilars and do them without having a further requirement for clinical studies and just use bioanalytical characterization that motors would provide you allow for many more biosimilars to come into the market.

Hence, the price goes down and the price goes down, the access increases and the penetration increases, we think this is a significant volume growth opportunity. And more importantly, it will make access to many more biologics available to a significant number of patients around the globe. So of all the things that I've seen in policy improvements over the last few years, if this one takes traction, it is a significant improvement in patients' health.

Okay. Maybe just a second, just a follow-up for Amol. Amol sounds like you have a good number of new products coming to market over the next 12 months. Is there a margin impact that we should be mindful of there? I know in the early days there can actually be some downward pressure even on a product that has a higher gross margin profile just until that product itself actually kind of gets up to scale. So I'm just wondering if there's something to be to think about there.

I think of it this way, right? I mean the products that are coming to market are a healthy combination of bio analytical characterization, IO separations and Empower. And clearly, bioseparations being chemistry and Empower being software are meaningfully accretive to our underlying gross margin profile and that will offset sort of any instrument-related new products, which, as you know, out of the gate are not fully value engineered. And then keep in mind that products like Alliance IS and TQ Absolute and TQ Absolute XR, while they were not fully value engineered out of the gate in the last 2 years, it now becomes a time for us to value engineer the MRR teams are laser-focused on that, and you'll start to see the accretive effect of that value engineering flow through.

Your next question will come from Catherine Schultz with Baird.

I'll just go ahead and ask my 2. First on BD, I know we'll have to wait for later this week to get the full results. But in their preliminary announcement, they called out some incremental headwinds in academia for Biosciences. So can you just talk to your confidence in that 4% to 4.5% top line for that asset next year? And then maybe on chemistry for the 4Q guide, I think you said up 6%, which would be a low single-digit sequential increase. We haven't seen less than a high single-digit sequential increase in the fourth quarter since 2012. So I just wanted to understand that a bit more. Was there less burn through the second quarter pull forward in the third quarter than you expected or any other timing dynamics we should be thinking about there?

Yes. So let me take the chemistry one first. That's simple, right? As we guide, we assume chemistry is 7% grower. We adjusted it a little bit for the Q2 pull-forward dynamics and tax. We didn't sort of relate the Q3 performance into Q4, just to be prudent at this stage, right? On the BD side, right? I mean, look, we had meaningfully reduced the ANG numbers because in our models, in U.S. A&G came down by as much as 40%.

Over the time, 25% to 27% in our underwriting. So what we are seeing in the ANG market is largely in line with what we underwrote. But then in any business, there's always going to be new headwinds and new tailwinds like we had with wire, right? I mean, right after the wire transaction, the biotech market meaningfully softened -- and as a true resilient team, we rose up to that challenge, and we accelerated synergies and found ways to make sure that we deliver the numbers we committed to -- the Street, right? And so that's generally the DNA of this team. whatever the cards are. We always lies up. We look at every crisis is an opportunity. And we make sure we deliver what we commit.

So Catherine, just to build on what Amol has said, we feel very good about what we are seeing with BD. As I mentioned, I visited customers myself had a chance to talk to academic customers, small pharma and large pharma customers. And on the Biosciences business, especially with the fax Discover S8A8, which are clearly setting a new benchmark in that category. I mean we're seeing very, very good reception. And now couple that with a more stable pharma environment, you should see CapEx start to go up in that environment, a more stable academic environment, you should see -- you should start to see that go up. And as far as the sort of early indication from BD on that market, it is largely in line, in fact, even better than what we have assumed for that business.

So really feel very good about our assumptions going forward.

Your next question will come from Brandon Couillard with Wells Fargo.

Second quarter in a row china has been up double digits, a lot better than peers. Do you think that's unique to bagging your portfolio and what do you assume for China for the year? And how sustainable is that as you look out to '26 based on kind of how you're going back the macro there?

Look, I mean, yes, China again grew double digits. And Pharma first grew largely because of our CDMO customers supporting the local biotech industry. And again, our new products allow us to to basically again show what I would call more differentiated performance and this is largely to do with execution and new products. When you look at the academic end market, that also grew almost 20%, and there, again, we took actions a couple of years ago to localize our full portfolio, expand our distribution. You couple that with fantastic execution -- fantastic commercial execution at the ground level and we've been able to win a significant share of the latest stimulus that has come through.

So the academic end market has been doing pretty well. As we look at Q4, I mean, we're seeing the same trends persist. We are modeling a high single-digit growth, a bit of a slowdown from Q1 from Q2 and Q3 which if you just take it in all, the first half grew double digits and the second half grew double digits. So China would have had a double-digit year who would have thought that, that's possible in this environment.

So I'm extremely proud of what the teams are doing on the ground and how they're taking new products and really operating effectively in a pretty dynamic environment.

The only thing I would add there, Brandon, is the academic and government stimulus-related revenue, you have to take it with a grain of salt, right? I mean, we very well know in our industry that it is just moving money from one year to another. And once the stimulus is done, you hit an air pocket, right? So that's not new or specific to anyone. And as we outlined at our Investor Day, we are modeling China low to mid-single digits in the 5-year time frame, and this outperformance versus that assumption is amazing.

This concludes the Q&A portion of the call. I will now hand it back to Caspar.

Thank you, Lila. This concludes our call. We look forward to connecting with many of you at upcoming events and conferences.

Let's start. Thanks, everybody, for sticking with us. Good morning. Welcome to the Wells Fargo Healthcare Conference. I'm Brandon Couillard. I cover life science tools and diagnostics. It is a real treat to have Waters with us at the conference this year. Joining us for this conversation CEO, Udit Batra. Udit, thanks for being here.

Brandon, thank you for having us. I thought you had a Waters labeled water. I saw this. Its blue in color, so these are Waters colors, and I said, "Oh, wow, look at this."

Minus the S. Obviously, 1 big topic that I want to get into, but let's start with the base business. You just reported another quarter high single digit instrumentation growth. TA was a little soft, but generally kind of better than expected across the board. What are some of the puts and takes out of the quarter in your view? And where are we in the instrument replacement cycle?

I thought that was going to be somewhere down the line. But yes, we'll talk about the instrument replacement cycle. But look, the base business goes from strength to strength. We saw momentum, just like we did in Q1, in Q2 as well, continuing along. And it's -- we're like -- we're boring. We say the same things, and we keep doing it again and again.

So it's along the 3 dimensions we've talked about all along for the last 5 years. Number one, the commercial initiatives are going extremely well. So you can just look at our report card on service attached, that's now 52%. E-commerce is well north of 40%, 45%. CDMO penetration is even higher than we had planned at this time. So the commercial momentum and the commercial initiatives are driving the growth.

Second, new products are doing extremely well, and they are contributing nicely to the 8-ish percent growth that we saw this quarter, be it Alliance iS. It is basically 3x the sales as it was last year, so really a fantastic launch. TQ Absolute XR is setting new standards with sensitivity and robustness in its category. Our columns are going extremely well with the MaxPeak Premier, again, growing 30-ish percent this quarter. So new products are contributing nicely.

And then the third piece is what we talked about at our Investor Day, idiosyncratic growth drivers. PFAS testing this quarter grew 30%. I mean, people said that's lower, that slowed down, yes, from a 90% growth in Q1. So year-to-date, close to 50-ish percent, lapping sort of 40% last year and 40% the previous year. So PFAS testing is growing nicely. GLP-1 testing first half of the year, 70% growth. India generics, high teens to low 20s.

So all the pieces that we talked about with you in the past are delivering, as we had said. Yes, there was a challenge with TA, especially in the U.S. that went down by about 20%, largely driven by R&D testing in material science, with material science customers or chemicals customers. But outside of the U.S., TA grew nicely. Within China, they grew high single digits, well into the double digits.

And the positive surprise came from China coming back nicely to growth, double-digit growth also for this past quarter, driven by CDMO activity. So nice quarter. Along the 3 dimensions, we've always talked about good progress across many different pieces of the business.

And then your question on the replacement cycle. Look, really good progress there. And the way to think about that is, look, LC-MS growth is again high single digits this quarter, same as last quarter, where it was in the double digits late last year was also high growth for LC-MS. So the replacement cycle driven largely by LCs is going extremely well.

And the way to think about it is, and maybe just a couple of contextual comments as folks think about it a bit more. That is a phenomenon that occurs in QA/QC and manufacturing where instruments are replaced every, say, 7 to 10 years. Arithmetically, to see what proportion of instruments have been replaced, you should just look at a CAGR. If you look at it on a 6-year CAGR basis from 2019 to the first half of 2025, you find that the LC-MS CAGR is still 1%, right? On average, LC-MS grows 5-ish percent, and that doesn't include better pricing, better new products like we are seeing now. So you're far away from finishing off the replacement cycle. We're still going to see excess growth beyond the 5% that we see on average.

So that's, I think, the first thing to keep in mind when you think about the replacement cycle, right? We're far away from being done with it.

Second, there are several segments that have not even started participating. We're seeing good growth in late-stage pharma, good growth in genetics, good growth in CDMOs. But China generics [indiscernible] government. CROs are still not participating and biotech is still not participating in this replacement cycle. So this time around the replacement cycle will be a bit longer.

And finally, I am so relieved to see some of our competition also talk about replacement because I was getting tons of comments from my Board saying, hey, you didn't invent the word replacement cycle. In fact, it's not attributed to Waters, it's attributed to the previous CEO of Agilent, Mike. Mike had used the word replacement cycle when I had joined the industry and said, what the heck is this replacement cycle. And I got to know him better and he taught me what the replacement cycle is and what math I need to look at. So I'm so glad our competition is also talking about the replacement cycle, finally, about a year after we did so.

It really started to pick up for them in the quarter they reported last week. I did want to ask you about 1 thing that they did mention, Agilent talked about seeing the CapEx approval process being just much smoother and easier now. Are you seeing a similar dynamic?

I'm very factually driven, sorry. So the way we measure the CapEx approval process is not just by the people who are approving it. I mean, there is, of course, hierarchy in any company, but also by the velocity of the funnel, right? The velocity of the funnel, meaning from the time an order gets into sort of concept to the time it's released and becomes a sale, slowed down post pandemic, and it's at that same pace. The velocity has not improved. The replacement cycle is going very well, but the approval processes are still similar as far as we can tell.

Any comments just on the competitive dynamic, the pricing environment in LC both going after, I imagine a lot of the same customers at the same time with something new?

Yes. I think you want to be again, be a bit more precise, right? On the replacement part of the business, which is 70% of LC, at least for us, I suspect it for other competitors as well, there, it is very difficult in QA/QC to displace a competitor who hasn't done anything wrong to the customer. If they're doing good service, if their instrument works, even with the Alliance iS, which is by far the best LC in the industry, it is very difficult to replace another competitor's instrument in the replacement domain.

30% of the business is new products and new users. That's where you win more, right? And that's where our win rates have been spectacular. And there, the customers are largely rewarding innovation. And with the Alliance iS, which reduces errors by 40%, introduced about 1.5 years ago, it's doing super well. Customers have derisked everything, and there that's, as I said, is now 3x the sales as it was last year, so 300% growth. TQ Absolute XR has now made it into the drug metabolism segment. That's doing extremely well. And I think our columns are now growing 30% for the third year running with the MaxPeak Premier technology.

So there, the 30% part of the business that is new users and new customers, that's where the share changes occur, right? And there, we've been doing extremely well, and we monitor that separately from the replacement cycle.

Okay. Switching gears over to the BD deal. When you and I spoke after the second quarter a few weeks ago, you said you actually passed twice on the deal, the first time it came across your desk. What changed your tune? What was the hook that kind of clicked in your mind to actually look at it again more seriously?

I think I wouldn't overplay how many times we passed. I think bankers come every single day and sometimes they come twice a day with the same idea. So I think all I want to say is, look, we were not proactively...

It was an entirely obvious, at least.

One part of the business was well understood, and we've known it for over -- at least I personally have known it for a decade. The other part was not, right? And I want to talk a little bit about how the process occurred. So we got in a room with the management presentation and what convinced us more were several things, right?

So one, the strategic fit is impeccable, right? So we were after building a biologics QC domain. And for that, you needed 2 pieces, and we were very public about it. We're nothing, as I said, we're nothing if we're not boring. We talked about this almost 5 years ago that we want to take our business model and build the same business model that exists in small molecules for large molecules. And for that, we need larger number of bioanalytical instruments, instruments that are used to characterize large molecules.

So that's why we went after Wyatt. That's why we acquired this technology called Halo to look at particles. And flow cytometry and faster PCR and single cell analysis are technologies that are used to assess large molecules as well. And they were on our road map. And in fact, if you go back to my presentations in different conferences, you'll find flow as one of the boxes on our Empower chart where we wanted other instruments. So that was number one.

Number two, in order to build strength in the biologics consumables space, you need a reagents portfolio. And we were after a reagents portfolio for a while, especially antibodies. And here, you get one of the best antibody portfolios in the industry, right? And the best -- one of the best capabilities in the biologics arena, right? So those 2 were big tick marks as we looked at the portfolio.

Number three, in mass spec. Mass spec is currently used in specialty diagnostic labs. And I'm not talking about core labs with high throughput, et cetera. But specialty diagnostics labs in hospitals today use mass spec for newborn screening, for endocrinology tests, for therapeutic drug monitoring, for drugs of abuse testing, tests that are difficult to do with immunoassays, right? Mass spec already is there.

We had the ambition to automate that workflow and increase the number of tests that are used with mass spec, right? That's a $1.5 billion end market, grows high single digits. We've been growing double digits in that market. We isolated that business or separated that business a few years ago, took it from a low single digit to a high single-digit grower. And we were on the hunt for regulatory and commercial capabilities and automation capabilities to enhance our portfolio there, and here comes BD with that exact same portfolio. So strategically, the fit is impeccable.

Second, and I'll stop here with the monologue. As we looked at the value creation opportunity, this is not pie in the sky stuff. This is concrete operational improvements, and you can -- on the revenue side, on the cost side, it's very tactical. But on the revenue side, these are operational improvements that we've made at Waters just now over the last 5 years. There's an instrument replacement opportunity. There's an e-commerce penetration opportunity, and there's a service attachment opportunity, where have you heard that before, right? And so we will -- we're just going to simply apply those into a new portfolio, and we did a ton of work during diligence to get comfortable with that, right? The strategic synergies are pretty obvious.

And then on the cost side, we saw -- we signed up for $200 million in synergies. In my previous experience with a large acquisition, we signed up for about -- if we had signed up for the same proportion, we would have about $130 million, $140 million more in synergies. So we have room there.

And thirdly, on the microbiology business, we haven't signed up for anything that we're going to do to improve that business. So we felt very comfortable on the value creation side. And then it's a question of what you pay for it, right? And we felt we paid quite a reasonable price to get asset.

You are definitely sharing a remarkable amount of detail. It's pretty clear the amount of diligence that's gone into the workup in the numbers. And I've got to give you high marks for that. I've never seen that before. I mean, this $290 million of revenue synergies, not $300 million, right? It's very specific. And I appreciate the detail.

Why share all that with TheStreet and kind of sign up for that. But at a higher level, right, BD is going to own 40% of Waters. [ They have a vested ] interest to actually sure that those synergy numbers are real, too. So when you went through the process, did you go in separate rooms and come up with your own numbers and then put them together and to validate them?

Highly collaborative process. And I sort of gave you an example of that when we talked about the instrument replacement or e-commerce or service attachment, right? As the -- and remember, there's a reverse diligence because BD owns 40% of the company, of the new company, right? So there was a reverse diligence as well.

And when we presented our instrument replacement protocol, as just an example, right, which started off as a spreadsheet on my computer back in 2020 is now a protocol that is in a CRM system. I mean, BD said, hey, why the heck aren't we doing this, right? So it's an operational improvement. Yes, it's called a synergy because we've done that and the new business hasn't done it, right? So a highly collaborative process.

In terms of the specifics that we gave, look, Brandon, that's what we've done at Waters in the last 5 years, right? I mean, 5 years ago, we gave sort of these 5 initiatives, instrument replacement service, attach e-commerce, new product launches and CDMOs. And every year at the JPMorgan conference, sorry, not here, at another conference, I presented the report card. And for 5 years running, we've done that. So I think it's less trying to pander to any ideas more habits. I mean, we like to be specific, and we'll share specifics. So you can make up your own mind, if you like, the story or not.

Same thing we did at Investor Day that was well before the BD acquisition. We sort of said, okay, these are the 4 or 5 idiosyncratic growth drivers, there's pricing that contributes this much, PFAS that contributes as much. And part of it has also got a method to its madness because if I show those externally and I show those internally, and I have names across each of those, I have people accountable both internally and externally to those numbers. It makes it much easier to run the business.

Maybe just start with cost synergies. I mean, I covered Sigma, it was a well-optimized company, right? It was already at peak margins. People say the same thing about Waters. What's different about the 2 transactions that would use that as the comp, right? You said you could probably get another $100 million of cost out. What's different about those 2? And which of the buckets will actually be hardest to take the longest?

I think you answered your own question. Sigma-Aldrich was in 2014 at an EBIT of 30%, only second to 1 other company. Guess who? Waters. Waters is at 31%, right? So it was a superficially well-optimized company. Millipore was in the mid-20s. If you compare it to BD today, BD is in the mid-20s and Waters is still at 30-plus percent, right? So there is more efficiency to be had from BD. I think that's lesson #1. Just looking at the math top-down.

Second, when you compare the synergies we extracted only costs, forget revenues for a second, only costs. We delivered between 7.7% and 8% of the total cost base of Millipore and Sigma, not Merck and Sigma, but Millipore and Sigma. If you apply the same ratio to this transaction around $4.5 billion cost base, you would land up with $335 million in cost synergies alone. So that's $135 million more than the $200 million we have signed up for, right? So that's just math. That's just arithmetic comparing what used to be an optimized company in Sigma's case, a little bit less optimized in BD's case. When you do the math and you said, well, you did that with Sigma. What if you did that same thing with BD, you have $135 million extra that you can do.

But I think it's more interesting to look at the specifics. Where do you see it? So we did this top-down math. That's what I do for a living. Then my team goes and says, okay, either you're silly and this number has no justification or we can come up with justification for this that is specific, right? So the $200 million contemplates, I just take 1 or 2 line items, right?

Take procurement for a minute, right? Any time you do a merger, you have a larger cost base of things that you procure indirect -- for indirect procurement and direct procurement, right, for COGS and for non-COGS domains. We have signed up for about 2% to 2.5% cost reduction on indirect and directly procured equipment and the like. That number is around $50 million out of the $200 million. If I just move it up to benchmark, which is external benchmarks, that's about 5% of the cost base. That would be about another -- that will be just a $50 million increase on the procurement line on its own, right? So that just gives you a sense of where we have room -- additional room on the cost synergies.

Take another example, G&A. On G&A, all we've done is we've said we'll take out overhead -- overlapping overhead in different functions. What we have not done and included is an optimization of the organization that is improving -- decreasing the number of layers from me to the front line and improving the number of people reporting to each individual basically increasing the span in the organization. So improving the spans and layers, which is something we did with Waters and you talked about Waters being so optimized.

Back in 2023, we took out 5% of the head count at Waters when the market slowed down by increasing the spans and decreasing the layers in the organization. You apply that logic here, that's another $30 million to $40 million, right? So you -- and purely on BD alone, right?

So on the cost side, we've backstopped. We have got a lot of backstops. And you say, again, go back to the collaborative process, we sat down with BD and we shared all of this, and we together said, well, we'll announce $200 million, and there were some other pieces on the -- that had to do with the negotiation. That's why we signed up for $200 million and not for $300 million on the cost side.

Got you. On the revenue synergy front, I mean, I think the commercial excellence bucket is pretty easy to understand. And you've executed that playbook very well at Waters. The high-growth adjacent applications are a little bit more debatable, I would say. I mean, it doesn't feel like to me that channel access has been the gating factor for mass spec becoming more prolific in Dx labs, right? It seems more of a -- what problem is it solving, for an example. But maybe touch on just that and what the actual use cases for things like PCR and flow in process development?

So let's take flow first and then we go to mass spec, right, because it will illustrate how we got excited and how BD got excited, right? So we got -- let's start with BD. BD got excited when they saw that Waters was going to be the party that they come together with because they have been for the longest time, trying to get flow cytometries, use increase in cell therapy. Today, flow cytometry is used.

So just taking a step back on cell therapy. For cell therapy, you extract cells from a patient, you analyze them using flow cytometers to see what you extracted. Then you modify them through a process, basically different types of processes, but let's assume you're modifying the cell. The modification is tracked in process using a flow cytometer. And the final release of the product, which is then fully modified itself, different types of cells that go back into the patient, guess what you use? You use flow cytometry to determine if the cell has been modified, as you said you were going to modify it, right? So the tool that is currently used is flow cytometry.

Now when you look at -- so that's sort of the basics. When you look at the market today, there's about what, 9 to 10 cell therapies in the market, maybe a bit more, maybe a bit less. About 30% of those use BD's flow cytometers, right? There are about 700 to 800 cell therapies in the pipeline globally. Less than 10% use BD's flow cytometers today.

So when they saw that Waters was coming in, they said, do you have access to all these folks, especially in the manufacturing domain, there's no one better than us as Waters to take the product into QC or into manufacturing, right? So that excited the team. We've started and looked at all the customers. We looked at the -- we looked at their locations. We looked at our commercial footprint and said, Yes, we can generate easily $40 million over the next 5 years with this particular synergy probably sooner, right? It's a cross-selling opportunity, if anything.

Second and which is something we don't have in the synergy numbers today, second and the more important strategic value is simplifying the flow cytometry workflow like we have it for LCs. And there are 2 pieces to it. One, taking the box and making it simpler.

And two, having the software be compatible with Empower. Where have you heard that before? You've heard -- just heard it recently with Wyatt. We acquired Wyatt with life scattering that was exactly in the same place where flow is today. And we took it into QA/QC by making it compatible with Empower, right? And so that's the part that is not in the synergy numbers that we've signed up for. So very practical again, right? So this is not pie in the sky stuff. This is very practical that has been diligence to the teams together.

On the mass spec side, mass spec today is used for newborn screening, for therapeutic drug monitoring, for drugs of abuse, for endocrinology in hospitals. 80% of the tests are done in hospitals with mass specs. Unfortunately, that workflow is not automated. And any time you have to expand the number of tests, it requires regulatory and medical expertise. Unfortunately, we have neither of those 2 capabilities at Waters. We've been building those, but we have neither of those 2 capabilities. And we had said in our strategic plan that we will develop these 2 capabilities, but it will take us some time.

BD has both of those capabilities, number one. That's a strategic imperative. Again, that's not in the numbers. What is in the numbers is just having extra access to more labs. Today, in that $1.5 billion specialty diagnostics market, we have roughly a $300 million business, okay? We don't access most of the hospitals globally because it's a smaller business. Our Waters division has better access to QA/QC labs but not to hospitals. With BD, we get that access immediately. That's part of the $40 million.

The other part is service. Clinical laboratories pay a lot to get 24 to 48 hour service turnarounds. We simply don't have enough service people associated with their clinical business to consummate that for our customers. With BD, you have service engineers present in each and every hospital around the globe, right? So service lift, a small amount of commercial expansion that gives you the diagnostics number. We've not included the strategic value that we would generate over the 3- to 5-year time frame, right?

So again, very, very tactical. So none of this is theoretical stuff. This is all sort of diligence with spreadsheets and that's why we're comfortable providing the details.

Got you. That's incredibly helpful. If I just think about the risks and to really, I don't know, intangible, I think about culture, power struggles, leadership, attrition, like BD actually has more employees than Waters. Are you going to put all the organization together? And I don't know. It's just like how do you just smash them together without...

You don't ever smash anything together. Let's again break it down a little bit, right? First thing is to sort of make sure that the home base is secured, that the base business is running well, right? And I think you'll agree with me that the Waters space business is running reasonably well, and we provide incredible amounts of detail to judge how it's going. And it's not just me or my CFO, Amol, it's actually a broader team and many of you who were at the Investor Day would have seen those folks, they're running different parts of the business. So the base business is in good shape, and that's a task #1 during this time.

Task #2 is from now until close and thank goodness, we have a few months, right, even though there's no regulatory challenge, the close is probably in Q1 of this year. So not probably, it's in Q1 this year, maybe a bit faster. But Q1 this -- sorry, in Q1 in 2026. From now until then, what we're doing is taking the plans that we developed together before the announcement, validating them. But more -- the integration, there's an integration planning team that's working on both sides with a few members who are validating these numbers, validating the customers without sort of overlap, so there's something called a clean team that sits aside.

But most importantly, their task is to find individuals who are going to be accountable to deliver these initiatives, deliver the improvement of flow penetration in cell therapy customers. Who's the individual who's going to do it. So at Waters, we have something called the deletion experiment. We love our teams, okay?

Don't get me wrong. We love what we do. We love the problems we're trying to solve, but a team has individuals. And we say, if you don't exist, how would we miss you? So if you were not there or more provocatively deleted, how would we miss you? So what is your unique contribution to the mission of the team? And the whole idea from now until close is to find the individuals who we will miss if they're not there and not able to deliver the flow synergy or the mass spec synergy, right? So the whole idea from now until then is that.

And the third piece that you mentioned is around culture. It's absolutely critical. And I want to take you back 5 years ago, actually, September 1, 5 years ago is when I joined Waters. Waters has always been a technologically strong company as is BD, right? You go to the flow headquarters in San Jose. My God. I mean, you have per square foot, probably one of the highest concentrations of IQ in a building, right? Super, super folks who understand flow cytometer, who understand cell therapy, who understand everything about lasers, about [ dyes ], et cetera. I mean, you name it.

Same as Waters, similar culture. Very focused on customers' problems, right? The challenge for Waters was not being commercially as strong and executionally not focused on a few topics not having enough accountability and delivering fast. And that's exactly the challenge that we find at BD.

And it's largely because it's a business in a very large medical equipment company, right? It just simply hasn't had the attention. So our intention is not to go in and start changing things left, right and center. Our intention is to bring the cultural elements that have helped Waters become successful over the last 5 years, and they have less to do with knocking heads and changing people left, right and center. They have more to do with changing the ways we do things, especially on execution, where we will focus on a few priorities, some of which have already been delineated publicly. We will do the deletion experiment. We'll say who's accountable for what. And there will be a sense of urgency. Not everything we do is we're going to get right.

So we're going to move fast and some experiments will not work, but fine, but there'll be enough experiments being done that at an aggregate level will be fine. So I mean that is what we intend to do. And you know what, you have to have sufficient level of humility to know what -- to not act like you know everything. We'll learn some things. And we'll talk about it once the acquisition starts. What's the fun of knowing everything and every model predicting what's going to happen in the future. So it's going to be interesting and fun. But I'm very, very optimistic about where we're headed.

It's really helpful. You're planning to raise $4 billion of debt to fund the deal. What's your assumed interest rate? And I expect you would probably do that maybe a few months before the close?

Yes, so no real challenge there. I think the question behind the question is what is your leverage ratio, it's about 2.5, 2.6. I mean, and within a year or so, we will probably go down a turn. And down the line, I mean, let's say, 2 years post acquisition, we'll be well below sort of closer to 1, 1.5, well below the 2, 2.5, right? So one can talk about capital allocation at that point.

Got you. I wanted to get your view on just pharma tariff, MFN. You spend a lot of time with customers. To what degree is that coming up in your conversations if at all?

Not a lot. I mean, especially -- so my relationships are -- my personal relationships are with the heads of manufacturing, heads of QC and the C-suite. My team sort of talks to people all along the chain. We don't hear, especially on the manufacturing and QC side, any impact of MFNs and tariffs.

Now you can say, okay, why not? You can get a bit more specific geographically as well. I mean, the U.S., Europe piece has been resolved with the 15% tariff that was just announced. With China, in particular, we've had that discussion. There is a lot of progress. But in China, we're seeing growth with the CDMO segment. So that's growing nicely. With India, the bilateral discussions that are taking place or the headlines that we've seen have nothing to do with what happens with the generics industry. The generics industry is exempted from these status, right? So while the headlines look provocative when you dig deeper, geography by geography, bilateral relationship by bilateral relationship, you don't find a lot of reason for concern.

And then lastly, repatriation manufacturing. Initially, it was contemplated that there would be a lot of localization of large manufacturing sites. In the interim, what's really happened is pharma has started to outsource a lot of CDMOs. And you see CDMO is growing quite nicely.

In the last second or so, I mean what's your state of the union on China? Are you seeing the green shoots and how do you feel about sort of just local competition when it comes to analytical instruments?

I can probably answer only 1 of the 2. Look, I mean, on China itself, very happy with what we've seen in the first half of the year. We see growth in pharma. Even though the generic segment is still down, we see CDMOs growing nicely to support the local biotech industry. So I think Wuxi, think Pharmaron, we have terrific relationships there. The consumables piece, the recurring revenue piece is growing very nicely there.

In the industrial segment, that's largely driven by more and more consumption on the chemical side, but mostly on the battery testing side, where the TA business is doing extremely well. And on the academic and government side in China, what we're seeing is, of course, the benefit of localization and broader distribution. So we grew high single digits in Q2 and in Q1 also, we had nice growth, but we also had some small impact of stimulus.

Going forward, for the balance of the year, true to Waters' approach, we've been cautious. We're assuming low single-digit to mid-single-digit growth. But it's super dynamic in China right now. And I mean it in a good way, especially in the pharma segment, where we had the top 8 customers of ours from China visit us in the last quarter, and they talked about how excited they are with the new innovation, especially on the biologics area.

Super. We'll have to leave it there. This has been a fantastic conversation. Thanks so much for being here. Everyone, have a great day.

Thank you.

Welcome, and thank you for standing by. I would like to inform all participants that this conference call as well as any Q&A may be recorded and made available to the clients of JPMorgan. Where a company is presenting, any recording may also be posted on their website. Views and opinions expressed by any external speakers on this call are those of the speakers and not of JPMorgan. Parts of this conference call may also be reproduced in JPMorgan Research. If you have any objections, you may disconnect at this time.

This call is intended for JPMorgan clients only as participants are not permitted on this call and should disconnect now. Unless otherwise permitted by internal JPMorgan policy, members of JPMorgan Investments and Corporate Banking are not permitted on this call and should disconnect now. I would like to now turn the call over to Rachel Vatnsdal. Please go ahead.

Perfect. Thank you, operator, and thank you, everyone, on the line for joining us today for our call with Waters. This is Rachel Vatnsdal from the Life Science Tools and Diagnostics team here at JPMorgan. And on the line, we have Udit Batra, CEO of Waters. So as we typically do with our CEO call series, this will be an hour of Q&A. So if any of you on the line do have questions, please feel free to either submit them via the roadshow app. Otherwise, you can send them to me via e-mail or over Bloomberg as well. So with that, Udit, thank you so much for joining us today.

Good morning, Rachel, and thank you for having us.

Yes, of course.

So let's start with your recent second quarter results, then we can kind of shift to some of the other topics like the BD deal and what you're seeing in the business. But just first and foremost, regarding the second quarter performance, you had a solid top line beat. You lifted the full year guide. So maybe now that you've had a bit more time to process the numbers, what is the message that you're really looking for people to take away coming out of the quarter?

Look, Rachel, I mean, second Q was a continuation of what we've been seeing with the business for the last several quarters now, right? I mean it is basically just an example of, I would say, very disciplined execution in a pretty dynamic environment, as you've probably seen with the results from many of our peers. So strong results, I mean, driven by double-digit growth in pharma, especially our focus on QA/QC, CDMOs, generics really helps us.

LC-MS was a hero again, driving high single-digit growth, driven by the replacement cycle and new products continued to contribute. And these results, as I said, are a result of highly disciplined execution of our strategy, which we had delineated several years ago, right? I mean, starting with commercial execution. And look, I mean, service attachment went up by 200 basis points, now at 52%. E-commerce is above 40% penetration already. And we saw an increase in CDMO penetration given the dynamism in that end customer. Innovation contributed nicely, right, Alliance iS, 300% growth, so 3x what we saw same time last year. TQ Absolute goes from strength to strength.

With the introduction of the XR version, we now see the robustness angle added on to the most sensitive instrument in the industry. So really growing nicely, 40% versus previous year. And our column business, our chemistry business had, again, a very, very strong quarter with new products contributing nicely. We launched the Protein A Affinity Columns, which become a real case example of using antibodies and affinity columns for separating large molecules. And then finally, the incremental growth drivers, right? This is the idiosyncratic growth drivers like GLP-1 testing, PFAS testing, India, which also grew high teens. Pricing was 200 basis points.

So across the board, a very strong performance. I suspect the only challenge we saw was the TA business in the United States declining, but we were more than able to offset it with the other growth drivers that I just mentioned. And this, of course, gave us the confidence to raise the full year guide to now 5.5% to 7.5% in constant currency growth and the EPS guide is also raised to $12.95 to $13.05, so 10% -- 9% to 10% year-on-year growth on EPS as well in such a dynamic environment. I think quite solid results, very happy with it. and really proud of the team that's remained focused.

Yes. Perfect. I wanted to dig a little bit into the guidance assumptions that you laid out on the back half. So you just walked through some of the strength and momentum that you saw in the second quarter. You opted to really not necessarily carry that forward in terms of momentum into the back half assumptions. So can you just walk us through what are you assuming in terms of third quarter, whether that's some of the regional performance, instrument versus recurring revenue assumptions, things like that? And then how do you see that approaching as we step up into the fourth quarter and slides as well?

Yes. It's a good question. And look, I mean, our guidance philosophy has not changed, right? I mean we took the victory from the first half of the year, passed it on in the guide raise. But the second half, we've still assumed is between 5% and 7% growth, right, for the top line. I think that's where your question is. And in that, instruments are on the lower end, roughly 5-ish percent, even though the first half of the year has been much more dynamic, and we see a good replacement cycle. We see very strong uptake of new products. We think there's a level of prudence that we want to build in just going into the back half of the year, like we've done at the beginning of the year. And recurring revenues are on the higher end, 6% to 7%.

And now if you would take the $8 million pull forward that we saw between China and Europe on chemistry, that gets flushed out in the second half. We have 1 extra day in the second half of the year, which adds $5 million. And so there's a net $3 million headwind in the second half of the year. So we say 6% to 7%. That gives you the range of 5% to 7% for the second half.

To your question on the third quarter, look, we've assumed the chemistry pull forward is equally spaced between Q3 and Q4. And the ramp from Q2 to Q3 is in line with what we've seen historically, roughly 1.3-ish percent. And your question also on regions, we've -- I mean, one of the more sort of positive surprises, I mean, India did very nicely again in high teens growth, but one of the more positive surprises was China, growing double digits again in the second quarter. But we've remained prudent and we said, look, it's going to be low to mid-single-digit growth for the second half of the year. And that just sort of gives you an indication of how we think about guidance in general.

I mean we'll beat. We'll raise based on the beat, but we will keep sufficient prudence. And then finally, a comment on Q4, which is where we've basically added an additional level of conservatism, I would say. Usually, Q3 to Q4, the ramp is about 22% historically in Waters. Last year, that number was about 18%. This year, we've assumed even lower than that 17.5%. So meaning almost no budget flush as one would like to call it, but the ramp in historical terms is probably at one of the lower levels that we've seen historically just in our assumptions. And as I said, the momentum is good. But as we've done in the past, we've become more constructive as the year goes on. And as the 3Q results come, we will get constructive about Q4.

Great. That's helpful context. I wanted to dig into the topic on reoccurring revenues. You mentioned some of the notable strength you saw in that quarter as chemistry grew -- or 16%, excuse me. But there was also that $8 million of pull forward that you called out. Even excluding that, though, chemistry still grew 9% in the quarter. So how should we think about the durability of strength on the chemistry side as we go into the back half of the year? And then can you walk us through, how did you quantify the magnitude of the pull forward? And what regions did you really see that come from within the second quarter as well?

I mean the simple way to think about chemistry and service in general, both of those businesses is it's like a sixth clock, right? When you go back 20 years for Waters, the growth is 6 -- give or take, 6-ish percent for the -- for both, 6-ish percent for service and 7-ish percent for chemistry. And so this quarter, we saw excluding the pull forward, 9% growth versus the previous year, right? So versus the 7% to 8% that we would have generally seen.

And so the pull forward -- with the pull forward itself, it would have been 16%. So 9% without it. Now this is higher than typical by about 100 to 150 basis points. And this is really our new products shining through. We're starting to see strong, strong uptake of the MaxPeak Premier family, the new launches with the Affinity -- Protein A Affinity Columns. I mean the customers are really appreciating specific solutions for complex large molecules and are collaborating with us as we develop new columns.

Second, we've seen strong pricing in the chemistry business, right? Given its differentiation, there is virtually no discount there. So as we raise prices, they flow through. Customers are quite amenable to that given the differentiation again. So we're starting to see that now improve the baseline. Now going forward, I would still caution against immediately assuming a 9% growth forever. I mean, we will -- as we deliver, we will talk about it more rather than in the rearview mirror. So I would still assume for the balance of the year, the 6% to 7% for the recurring revenue that I mentioned. Long term, of course, we expect this to become much more dynamic.

Now to your question on the determination of the pull forward, I mean, remember, our business is largely focused on late-stage development and QA/QC. And whenever there is an aberration to the trend, we're easily able to pick it up because it's quite predictable what's going to happen from one quarter to the other by customer, by geography, by segment, and we have a ton of historical data.

So we saw an aberration in China. We saw an aberration in Europe. In China, roughly $5 million-ish was pulled forward, and this was confirmed by our colleagues on the ground. And the same thing was true in Europe, but the number was around $3-ish million, right? So as customers were just planning for tariffs. So I hope that clarifies the chemistry piece. But I mean, long term, this is a fantastic business. We have a very good position. As we've invested more on the novel modality side, on the biologics side, customers have appreciated, and that shows up in the strength of the growth as well as the pricing.

Got it. That's helpful. Maybe a follow-up on that, but I'm getting over e-mail a little bit here is just on the pricing contribution on chemistry. Can you unpack for us what was pricing in chemistry in the second quarter? And what are you assuming in the back half for pricing on that piece?

Yes. I mean it's no different than we've historically done. We don't break it down by product area, right? So -- but the general algorithm is -- if you think of our overall pricing algorithm of 100 to 200 basis points, we're saying now 150 basis points going forward. This quarter, we saw 200 basis points for the whole business.

On the chemistry side, the stick rate is almost 100%, right? So if you look at our overall pricing, 20% of the business is chemistry, 5% price increase flows right to the bottom line. That's 100 basis points of contribution to the bottom. So I would keep that as a general assumption. And if it is more, we will discuss it when it comes.

Got it. That's helpful. One more follow-up just on this topic of the strong performance in the reoccurring revenues this quarter is one area that I think we're getting a lot of questions on is around the margins in the second quarter, given the strong performance you saw in reoccurring revenues. But that margin was maybe a little bit lighter than some investors were expecting given that strength.

So can you walk us through, Udit, what are the moving pieces on the margin front in second quarter? Were there any like one-timers there? How much of it was mix? And then how do you think about that gross margin and operating margin line evolving as we move throughout the back half of the year as well?

Yes. I mean, look, I mean, a simple way to think about it is like the second quarter, the gross margin was 58.3% and operating margin slightly north of 29%, 29.1%. This is relatively soft and was driven by basically a regional sales mix. I mean you saw certain regions that have lower margins growing stronger. And the margin dilution also came from the tariff surcharges as well as elevated freight costs that came in the second quarter.

So the gross margin was down by about 100 basis points and operating margin down by about 10 basis points versus the same time previous year. For the full year, I mean, basically, we've assumed a 59% gross margin and an operating margin of roughly 31%. This is similar to last year's levels despite the onset of tariff-related costs and the margin headwinds we've seen this year. So in the second half, margin performance should improve versus first half, right, given costs like freight and tariff-driven relocation costs where we relocated certain manufacturing sites, manufacturing -- certain manufacturing for specific products. I mean these were specific to the first half and are not expected in the second half of the year.

So we expect progressive improvement of the margins through Q3 and Q4 versus last year. And of course, Q4 always benefits from a volume leverage given the size. So I hope that clarifies the assumptions.

Yes, that's helpful. Maybe shifting over to the instrument replacement cycle. During the quarter, you guys pointed towards 4% instrument growth which really was underpinned by that high single-digit growth in LC-MS. And then obviously, TA was a bit of a drag, as you alluded to earlier. Prior quarter, though, you had 11% instrument growth.

So this is kind of a key point that investors were focusing in on driving some of the fears of did the replacement cycle decelerate. You've also cited some of this lumpiness now on instruments quarter-to-quarter. And then if you look at it on the first half performance for instruments, the performance was solid.

So can you walk us through how are you thinking about the health of that replacement cycle going forward, specifically just for Waters, if we exclude the BD potential tailwind here. How should we think about the instrument growth as we go into the third quarter and back half overall? And what type of order book do you need to see to underpin your back half assumptions within the guide?

Yes. Look, it's a common question on the instrument replacement cycle. Look, the instrument replacement cycle remains healthy, and let me sort of give some boundary conditions that will help you think through it. This quarter, LC-MS grew high single digits, and it was driven by late-stage pharma, QA/QC, so generics, CDMOs, places where the replacement cycle is going nicely, and it's driven by our new product portfolio, not in any small part, right? And that is continuing and the funnels are very strong as we look at the back half of the year, right?

So that's just the here and now on the replacement cycle and what we see on LC-MS. But take a step back, right? Typical replacement cycles usually last 2 to 3 years, right? And this is the algorithm we have talked about at our Investor Day as well. And in this time frame, instruments will grow between 7% and 8% and largely driven by the LC-MS outperformance, which enables the long-term instrument growth CAGR to catch up to about 5% growth, right? So as we sit here, from 2019 to 2025, the first half of the year, the LC-MS CAGR still stands at only 2%.

So there is a long runway ahead of us to catch up to the 5% CAGR. So that's the first point I would want you to understand. The second, and we never -- at Waters, we never have only one way we want to achieve our target. We also have a number of these idiosyncratic growth drivers that are independent of the replacement cycle and are related to exposures where testing volume dynamics are seeing quite significant growth, right?

I mean this is GLP-1 testing, which is expected to add 30 basis points a year, which is well ahead of that target. It's growing 70% year-to-date. PFAS testing growing 50% year-to-date. Biologics testing, India genetics, all of this added up, remember, to 270 to 200 basis points in addition to our average instrument growth rate in the near to midterm.

Now you add these 2 dynamics and you say, well, the instrument growth rate should generally be high single digit to high single digit plus. And then you sort of subtract from that, the fact that not all customers are on the table today, like China generics, like biotechs, like CROs, drug discovery. And so these segments, as they return, you will see the catch-up become even more robust. But there is nothing that tells us at this point that we move away from the 7% to 8% that we talked about for instrument growth rate during this catch-up period. And the year-to-date results show that.

I would not pay too much attention to quarter-on-quarter trends, especially when you can point towards one specific challenge that came with TA in the United States. So the underlying replacement cycle is strong. Idiosyncratic growth drivers are contributing, and we've been pretty transparent about their contribution. Pricing is doing extremely well. And China generics is still tepid, CROs are still tepid, drug discovery and biotech is still tepid. So the replacement cycle in this time around will likely last longer. I hope that gives you not just the specifics, but sort of a reminder of how we are thinking about it.

Yes. No, that's helpful. Maybe just on that topic, can you kind of break down how we should expect some of the replacement cycle to kick in across pharma drug discovery, CROs and then also some of the branded generics in China? And when should we expect some of those to start firing on all cylinders in terms of the replacement cycle as well for those categories?

Too many toys in the toy store, Rachel, too early to sathink very difficult to tell exactly when some of these things will pick up. I mean there is a deficit that's building in branded generics in China. There's a deficit that's building in stable biotechs, which some of whom have funding again. And there's a deficit for sure in drug discovery and to some extent, also in academia and replacing LCs. But no, at this point, no real indication exactly when that augments our current projections.

Got it. That's helpful. Maybe shifting then to the BD announcement. Obviously, you recently announced that you guys are acquiring BD's Biosciences and Diagnostic Solutions business. So just to start out the conversation at a high level, can you walk us through the strategic rationale for this transaction? Why do you believe now is the right time to do such a transformative deal for Waters? And then also just remind us how competitive was this process that you guys went through for the transaction?

Right. So again, I mean, take a step back, right? I mean 5 years ago, back at your conference in 2021, we stated that we had 3 goals in our strategy. One, to regain our commercial momentum, right, to catch up to sort of historical Waters levels with instrument replacement, service attachment, e-commerce and very tactical commercial initiatives, there are 5 of them. And we gave you an update on those every single year.

Second, we said we want to reignite our innovation engine and bring back Waters to the podium with -- in LC, in mass spec in chemistry and informatics. And I think we've made some nice progress there as well. And then third, we said we -- once we've done these 2 things, we want to ensure that the future is secure by increasing our strength in adjacencies, which look similar to our recurring business model with replacement and service and informatics and chemistry and add some higher growth to our overall business, right? So these are the 3 things that we stated. The first 2 chapters have gone really superbly, right? I mean the commercial momentum is back. And even in a very dynamic sort of last 5 years, we stood out as a company that's been able to withstand the challenges just given the choices we've made and the execution.

Second, on the innovation side, I mean, Alliance iS, TQ Absolute, TQ Absolute XR, Xevo MRT now, the columns, the chemistry portfolio with MaxPeak, now informatics with multi-angle light scattering on Empower, right? So innovation, internal homegrown innovation is going extremely well. Then brings to my third chapter, where we want to accelerate in the adjacencies, and there were 4 to 5 adjacencies where we identified.

With BD, with shot, we were able to accelerate our move into 3 prime adjacencies that we had outlined, right? The first one was having a stronger portfolio in bioanalytical characterization. As the pipeline of our key customers starts becoming much more focused on novel modalities and biologics. We felt we needed to have a broader portfolio of analytical instruments that eventually we could take into QA/QC.

And basically, 2 of the most significant gaps in our portfolio were around flow cytometry and PCR. BD brings those -- not just brings them, they bring them at scale where the technology has been derisked and the commercial risk is 0, right? They are a strong, strong player in those 2 segments.

Second, we wanted to advance our portfolio in bioseparations, and we've been doing a pretty good job organically with it. But we felt we needed access to reagents, especially antibodies to take our hypothesis on attaching antibodies to columns. And here, we've just done the proof of -- launched the proof of concept with Protein A columns, which is going extremely, extremely well. And we needed access to a large antibody portfolio and BD brings that. So that's number two on the adjacencies.

And number three, we've also been clear that mass spec belongs in specialty diagnostics. And in fact, Roche's entry into this space really verifies this hypothesis. We feel that mass spec belongs in specialty diagnostics, but we did not have the commercial reach nor the regulatory and medical affairs capabilities to do justice to it in the short term. So we collaborated with a player in China to do it for China for China. But outside of China, meaning in Europe and the United States, we were on the lookout for partners or acquisition targets. And here is BD, which with scale in molecular diagnostics and the exact capabilities we need. So strategically complete and clear fit.

And then turning to the quality of the asset, and I'll keep these comments brief, and you can pull any thread that you like in any of these areas, right? I mean the quality of the asset, roughly 80% of the portfolio is in leading positions. Flow cytometry is considered a jewel in the life science tools space for a long time. I mean, what LC is to Waters, Flow is to Becton, Dickinson, right? So this is a really, really strong brand that we're bringing into armamentarium.

Second, in the diagnostics space, especially microbiology. Microbiology, which is 65% of the diagnostics segment, has no pricing or reimbursement pressure given that it's only 2 competitors who are supplying most of the global customers by and large. And in the DRGs, microbiology testing is a very small portion of the overall cost, not dissimilar to QA/QC for large pharma. So very, very strong portfolio. And then, of course, we'll have ample opportunity, hopefully, to talk about the synergies. I mean we've signed up roughly $345 million in synergies, creating a ton of value. And all of these synergies, and we went through this in our Q2 prepared remarks as well, are very tactical. I mean they are here and now. These are sort of things that we've done at Waters.

During the diligence, we went in quite deep into understanding what the drivers were, what the fact base was, talking to several customers and really digging in and understanding how tactical these revenue and cost synergies were. We feel very comfortable that we can achieve the $345 million and more often than not surpass it like we've done with other objectives. And that stands up a very, very strong life science tools and diagnostics player with a resilient revenue growth like Waters. I mean, by the end of the 5-year period, we're looking at a 7% growth for the combined company and a 32% operating margin, which again puts us in the top of the industry. So feel extremely, extremely good. I mean, Rachel, I'm again in California here to meet colleagues. I'm wearing to go. I'm talking about it.

Perfect. Yes, I wanted to dig into some of the revenue synergies that you laid out during the transaction announcement. Obviously, you went into a little bit more detail on the second quarter earnings call a few weeks ago as well. But I think this is still the area where investors are trying to understand the achievability of some of these revenue synergies.

So can you just walk us through the confidence in achieving some of these revenue targets? Maybe rank order for us where you have the most confidence, whether that is the revenue synergies on commercial excellence or the adjacencies or cross-selling and then some of the associated time lines with each of those buckets as well?

Yes. Look, I mean, as I go through them, maybe we can talk about the rank order. But if I were to sort of do it superficially right now, I'd say, look, the commercial excellence synergies are here and now. This is stuff that we've been doing at Waters for the last 5 years. We went from a spreadsheet-based instrument replacement protocol where there was a deficit of about 13,000 instruments that we had to replace at Waters. And mind you, the deficit is now 4,000.

So we track it through a multiyear time frame initially starting with Excel spreadsheets, which I created on a weekend and had the team filled to now a CRM tool that is managed with Rob Carpio and his team and very, very sort of very careful management of replacement with different segments and propensity to replace across different customer segments. So huge confidence on the on the commercial side, on the strategic adjacencies, 2 out of 3 are almost cross-selling. Mass spec into diagnostics is basically just accessing the commercial infrastructure that BD has with molecular diagnostics for specialty labs and their service team that we currently don't have for mass spec will provide immediate expansion of service, but also allow us to improve the attachment on that front.

And then on Flow and PCR, all we've modeled is taking flow and PCR into process development, using Waters resources and not necessarily moving them into QA/QC. Huge confidence across the 3 commercial ones, these 2, which are here and now. On the technical ones, especially taking the antibodies and attaching them to our columns. We have proof of concept as about between 15 and 20 programs that were stranded just waiting for access to antibodies, which will now start in earnest as soon as we get access to the full portfolio. And we feel that should hit in the 3- to 5-year time frame. That's the one that will take a bit of time to develop technologically.

And then lastly, on cross-selling with access to DMPK or other segments. I mean, again, that's here and now, given that we have the best instrument in the industry with mass spec with TQ Absolute XR that belongs in DMPK, and we've already done a proof of concept with several customers there. But let me just go through it a little bit more systematically, but that gives you sort of a flavor of confidence across, which is pretty significant. And in all of these areas, we have backstops, right?

So I mean we mapped out roughly what, $290 million in revenue synergies over 5 years, right? And it basically spans across these 3 defined and execution-ready areas. So $150 million from commercial excellence, $115 million from high-growth adjacencies, $60 million from cross-selling, right? And this is similar to what we had done back at Waters, especially on commercial excellence. I mean the BD business resembles what Waters looked like back in 2020, 30% of the installed base of instruments is due for replacement, right, 30%.

70% of the revenue comes from reagents, yet only a small percentage flows through e-commerce, right? And 40% of the installed base of instruments is on service coverage. And I went through earlier also on how we've improved service attachment rate over the last few years at Waters. So these are areas that we've just worked on, and we're getting just a larger portfolio to apply these capabilities on, right?

So just take one of these, for example, by applying the same playbook, I mean, the $115 million, 1-1-5, $115 million is well within reach, right? So for example, e-commerce attachment, if you just increase it by 20% on BD's $1.8 billion reagent business, like we've achieved with Waters, it unlocks the $75 million that we've signed up for there alone, right? And this math is based on what we've seen firsthand at Waters. This is not sort of consulting math. I mean this is stuff that we've seen ourselves where an incremental dollar is generated for every $5 that are shifted to digital channels.

And at Sigma-Aldrich, we had roughly 75% of antibodies going through e-commerce, right? So this is far, far from what we will be signing up for. And in terms of bioanalytical characterization, bioseparations and mass spec and diagnostics, each sort of contribute between $35 million and $40 million. So as I said before, for Flow and PCR, we're just assuming that these get access and these are BDs products that get access to QA/QC laboratories and process development laboratories from Waters, initially only process development, and that sort of justifies the $40 million.

And over time, we intend to take flow cytometry and PCR into QA/QC, like we have taken multi-angle light scattering from Wyatt into QA/QC. But the number, the $40 million only envisages access to process development. So the QA/QC move is an upside. Similarly, for bioseparations, as I mentioned, the $35 million basically just is based on concrete opportunities that we currently have stranded in our pipeline, which will be advanced with access to the antibodies.

And on the diagnostics side, look, I mean, upstream proteomics is identifying new biomarkers for early disease detection, right? And mass spec is an essential tool that is now -- that is going to be used for multiplex diagnostic, right? So Roche's entry into the space with a high throughput platform validates this hypothesis. And so with BD, we gain immediate access to global specialty diagnostic labs, which we today don't have at Waters and the service infrastructure that gives us a 24-hour premium plan.

So this channel and service capability alone gives us a $40 million upside. And this, again, does not include the development of a fully integrated mass spec platform like Roche has. We've done that already in China with KHV. We intend to do it here, but that's an upside, right? And on cross-selling, it's a significant revenue synergy where BD's strong presence in pharma clinical laboratories, which, again, where Waters doesn't have a lot of access today, gives us reach into those laboratories where we can place our TQ Absolute and TQ Absolute XR.

And previously, we haven't had penetration there, and that is part of the cross-selling that we're signing up for roughly a $600-ish million TAM. We are assuming $60 million over the next few years. Now what this does not include is any contribution from mass spec for identification of microbes in microbiology labs or taking microbiology into pharma stability testing for QA/QC applications, right? And these 2 areas are -- can contribute quite a bit more. Each one of them is between $300 million to $500 million in TAM and our existing end markets where these products are relevant, but BD has not taken them there due to either lack of technical capabilities or commercial access.

So in all, I feel very good about the $290 million that we have signed up for. It does not include the transformation that we intend to orchestrate with the microbiology business to get it back to sort of peer level growth. It does not include the revenue synergies that come from the microbiology business. And the $345 million does not include overachieving the cost synergies where the overall $345 million of EBITDA impact does not include the overachievement of cost synergies and bringing it in line with what we did with Sigma-Aldrich as well. So I feel very good that these are tactical here and now initiatives.

Perfect. That's a lot of detail on the revenue synergies. So maybe I could just shift over to the cost synergy side of things that you just alluded to. You said that you expect to achieve $200 million in cost synergies and also expand the operating margin profile of the company by 500 basis points by 2030. So can you walk us through some of these key drivers and the confidence on the cost synergy side and then also on that margin expansion over the next 5 years here?

Yes. So on the cost side, Rachel, so like I said, it's $200 million by the end of year 3, right? $80 million comes from manufacturing and supply chain. About $40 million of that $80 million is from site rationalization and consolidation, right? So we've identified meaningful overlap across the combined manufacturing and distribution footprint, including specific sites where there are opportunities for rationalization and to consolidate. So this provides a very clear and actionable path forward.

And Chris Ross, who is heading up the integration office now comes from operations. So I have immense confidence that we will achieve this rather rapidly. $30 million comes from direct procurement savings. Now this is highly conservative. It's just 2.5% of the combined material spend. Usually, from a benchmarking perspective, you'll see 5% achieved, right? So we're just signing up for half of it, $30 million. So there's a $30 million upside here. We've assumed $10 million from freight lane optimization.

So this is basically just using the same freight lanes across a larger portfolio. So we can overachieve that, I'm quite certain. Both freight and direct procurement ramped up quickly within the first 3 years. Site rationalization will usually begin in year 2 with full benefits by the end of year 3. And again, application of supply chain rationalization, procurement leverage, workforce consolidation and overlapping areas is something we have not incorporated. So $80 million is quite straightforward and -- straightforward to achieve.

Second, the $75 million coming from commercial infrastructure, service and technology. So 50% will come -- of this will come from consolidating regional management, inside sales, sales operations with 0 impact on quota-carrying sales reps, right? So that's the first part of it, where we will consolidate regional structures, which are -- which, of course, are going to be redundant across the 2 companies. 50% of it also comes from eliminating duplicative technology platforms.

We don't need 2 CRM tools. We don't need 2 e-commercees. We don't need 2 analytics platforms and centrals -- and the central service oversight is there across the 2 companies, and we would want to make sure we consolidate that as well. Beyond the $75 million that we've modeled in commercial infrastructure, service and technology, there is significant opportunity as we examined the BD structure in improving spans and layers.

So as a reminder, back in early 2023, we took out 5% of Waters' overall headcount given the slowdown in the market, and this was Q1 of 2023 when we implemented the program. This was largely done by reducing the number of layers from me all the way to the front line and increasing the span for each manager. So typically now at Waters, each manager has roughly 7 direct reports on average, some more, some less, and there's only 7 layers from me all the way to the front line. And this is very different at BD. Adding this would give us a much more significant number on -- and adding on to that $75 million. So that's manufacturing and supply chain and commercial and infrastructure.

And the third is about $45 million from indirect procurement and a global -- and using our global capability center in Bangalore. So the $20 million from indirect procurement savings is less than 2% again of the indirect spend. And usually, I mean, even in the Sigma days, we did more than double of this. So this is well below any benchmark, but $20 million out of the $45 million comes from indirect procurement. The balance comes from in-sourcing outsourced services that BD today has to the Waters India Global Capability Centers where we already deliver equivalent output of $0.30 to $1. So whatever we can do in our in-house capability center is 70% cheaper versus going outside.

And there's, of course, additional upside from rebalancing roles from high-cost geographies into India and something that we would treat as an upside. Finally, I mean, this Indirect procurement savings usually ramps up in year 1 and 2, so you should see it sooner than later. And the global capabilities organization requires us to renegotiate contracts with external IT vendors usually takes 2 to 3 years, right? So that's overall the $200 million in cost synergies, right?

And again, I'll remind you, this is sort of grounded in what we already did back at Waters without sort of the benefit of an integration, which is also 5% of our overall headcount. So the 4.7% here of the total cost base with the cost synergies is imminently achievable even if you look at it from that perspective.

And then secondly, of course, if I go back to my own experience and Chris Ross' experience at MilliporeSigma, when we combined those 2 organizations, we took out between 7.5% to 8% of the total cost base. And if you just take that alone, you get to $325 million in cost synergies. So significant upside potential here. So that's, I think, the first part of your question, just elaboration on the cost synergies.

Now you also asked about our assumption on the margin going from 27% to 32%. I mean, let me sort of dimensionalize or give you just sort of a numerical -- a simple numerical way to look at it, right? Start with 27%, 250 basis points from -- will come from the $345 million synergies, of which 200 basis points are tied to margin benefit from cost synergies only at 4.7% of the combined company cost threshold. Remember, at Sigma, we did much, much larger. So this is sort of our lower end, 250 basis points on the $345 million in synergies, another 130 to 150 basis points from Waters stand-alone. Remember what we spoke about at the Investor Day, the trajectory that we have to get to closer to 35% by 2030. And this is a program that we will continue to implement. And that leaves between 50 and 100 basis points for BD stand-alone.

Applying just our pricing discipline alone, including the resumption of, for instance, in the microbiology business of annual price increases on the [ BaTech ] platform, which has been constant for the last few years and greater volume leverage gets you that 100 basis points. So 27 plus 250 plus -- 250 from the overall synergies, 130 to 150 from Waters stand-alone and about 50 to 100 from BD stand-alone gets you to the 32%. So long answer, happy to pull any thread if you like.

Yes. Perfect. Maybe just in the interest of time, I think shifting over to 2026 and the discussion there because I've been getting some questions from investors on it. So if we look at your current guidance for the rest of this year, it really implies like a mid-single-digit organic growth for Waters in the fourth quarter.

So how should we think about this exit rate in the context of the 2026 outlook for stand-alone Waters? And then also, how do we think about margins for stand-alone Waters as well as we look to next year?

Yes. Look, I mean we will not guide fully to all of next year, but I think I can give you sort of guidepost on a way to think about it. First half of the year, you saw us on the lower end of the high single-digit range, right, 7-ish percent growth. And I think your question is more around what should you assume when the company is combined? And what would be Waters stand-alone, what would be BD stand-alone, what would be synergies. Let me sort of take each of those and answer that question and it will give you the answer to the Waters question, right?

BD stand-alone, we've assumed roughly 4.5%, right? And we can get into the details in a bit. But we've assumed in 2026, there will be a bit of recovery. It still doesn't recover to the '19 to '24 growth rate, but 4.5-ish percent. You add the revenue synergies in year 1 to it, and you basically then finally add the Waters growth rate, which I would be comfortable in saying that it is on the lower end of the high single-digit number, meaning say, between 6% and 7%. You add those 3 up to a weighted average, you come up with a company that's growing north of 6%. So I think that's how I would model it, yes.

And there are, of course -- there can be deviations on one or the other of that. But overall, I think you can be quite sure that a 6-plus percent growth is within reach in 2026 for the combined company.

That's helpful. Just to follow up on that, though, any comments on margins? And then maybe more broadly, just given the timing of when the deal closes, when should we expect to actually receive formal 2026 guidance for you guys?

Yes. Look, I mean, it depends on when the deal closes, right? I mean if the deal closes at the end of Q1 and after our Q4, we usually give our full year guidance with our Q4 earnings. So it depends on the timing, Rachel. If it is before, we will do our best to try to give you an indication of what the full year will look like. I mean not much more to say at this point, but it's usually in that time frame that you should get guidance. I won't comment much more on the margin side at this stage.

Yes. Fair enough. Maybe shifting over then to some of the end market discussion. So pharma biotech, you guys grew 11% in that end market this quarter. It grew 8% in first quarter as well. So clearly, you're seeing some traction on the pharma side, especially. That said, we've had some crazy headlines at the start of the year with things like MFN, tariffs, so investor sentiment is pretty pressured on this pharma end market. So can you just reconcile that for us?

What are you hearing from your pharma customers in regards to some of these headlines and their plans on the CapEx replacement cycle? And what gives you confidence that you're not going to experience some type of a delay in the instrument replacement cycle in the coming quarters here?

Yes. So 3 comments, Rachel. First, on the pharma -- overall pharma side, remember, we are mostly in late-stage development, QA/QC, sort of mostly CDMOs or generics, right? So that's the part of pharma that generally is preserved even through cycles, right? And we have a deficit on the replacement cycle, as I mentioned earlier, I mean, the 5-, 6-year CAGR is now still at 2%. We have very, very strong funnels.

So analytically, no reason for anything to slow down, right? Then the qualitative -- second piece is the qualitative discussions. The qualitative discussions completely support it, meaning once we have planned the replacement cycle for LC-MS instruments in QA/QC laboratories with CDMO players, it's a multiyear process. And let me sort of explain how that becomes multiyear, right? The discussion to determine the exact portfolio you're going to use, exact sites that you're going to replace it at is a very large cross-functional discussion that starts with looking at IT and saying, okay, what version of Empower are you on? And what version of Windows are you on?

So incidentally, Microsoft has just sort of upgraded to Windows 11. Many of our large pharma customers are adopting it. That then allows you to take the latest version of Empower that allows you to get Alliance iS into the mix, which our customers are extremely keen to get into the mix in QA/QC, right? So those 3 then determine what exact sort of portfolio you use for the replacement. And it's a multiyear process basically agreed upon across many different functions in these pharma customers.

So analytically, I mean, the replacement cycle has a huge deficit still. quantitatively, the funnels are very strong, and we are still at 2% on a CAGR basis. So there's still more to go. And from a discussion perspective, we are not seeing any pressure from the customers in those categories.

Now the story is a little bit different in drug discovery, in biotechs, to some extent, in CROs and also China genetics, which is a different type of pressure, but different type of discussion. But in all of these, there is still no start to replacing instruments, right? So no real change. And we are following the MFM discussions.

We're having discussions with our customers. But where we sit today, there is really minimal to no impact on the change of trajectory.

Got it. That's helpful. Maybe digging into China, I think that's another area where we've gotten some questions on the line. This region returned to growth for Waters late last year. You posted 14% growth in China in the second quarter. But we've seen China performance from the broader Tools Group be a little bit mixed just given some of the macroeconomic pressures in the region still persist. So can you reconcile this for us? What is driving Waters performance in the region? What makes your portfolio different to some of your peers in China? And then, yes, what are you seeing in the region from a customer and product perspective here?

Yes. In China, China is not sort of one market, right, as much as we like to think of it as one sort of monolith, break it up into the 3 end markets, and we saw double-digit growth this quarter. Break it up into the 3 different end markets. I mean, in pharma, we saw high single-digit growth, while branded generics was still pressured. That's still sort of 50% of our pharma business. They were still pressured and declining, but CDMOs more than offset it, right? And you say, wow, CDMO is growing in China, what's the basis?

Well, I mean, just read the headlines on biotech, 35% of in-licensing of global biotech molecules comes from China now. And there are structural advantages of doing early-stage trials and derisking large molecule development in China that this is a secular trend now, right, unless the U.S., Europe and other countries catch up in simplifying the early-stage development of large molecules, I mean, China has an advantage, and you will see this continue to grow. CDMOs support these companies, and it's fantastic, right? We're seeing some really nice dynamism both in service as well as in chemistry.

On the instrument side, back during COVID, a lot of the CDMOs had purchased quite a large number of instruments. And when the demand slowed down, those instruments were not being utilized as much, but they're now starting to increase the utilization, which is what we see with service growth and with chemistry growth. So really robust trend, I would say, rather secular now unless real structural changes are made in biotech development in the rest of the world. And I think we telegraphed this about a year ago as well, but we're starting to see the impact of it. And we met 8 of our top customers in Wilford at our headquarters, and they were talking about the latest and the greatest technologies that they can bring in to support these biotech customers. So that's pharma.

Industrial, TA is a paradoxical business for us, right? While in the U.S., we had a huge challenge with sort of classical materials customers in China with battery testing, was fantastic. It grew double digits. With chemical analysis, it grew double digits. The industrial segment did extremely well in China for us, grew nicely in the double-digit arena, largely driven by the TA strength.

And third, in the academic and government segment, we worked extremely hard over the last few years to localize our portfolio and improve our distribution. This has benefited us, right? So this has benefited us in winning disproportionate share in -- with those customers and more recently also with the stimulus that came in -- a part of the stimulus that came in Q2.

So China, I think overall, I mean, I'm not ready to sort of underwrite double-digit growth that we've seen in the first half of the year for a long period to come. The second half of the year, we have good visibility. We think it's going to be nice and dynamic. But we've just -- as we've done in the past, we've said low to mid-single-digit growth in our second half guidance, but all 3 end markets have different independent drivers, right?

So pharma with CDMOs, industrial with battery testing and chemical analysis and A&G with a localized portfolio with some benefit from the stimulus. So I hope that gives you color on Waters is growth in China. I'm very happy with what the team is doing there. And I mean, I'll just take one more point. We usually -- you'll see us sort of -- and this is true with the BD acquisition as well. When we put a target on the table, we have multiple ways of achieving it, right? And so when we talk about guidance, there are geographies that we can pull and push faster or slower. There are portfolio pieces. And we feel very good about where now our China business sits competitively.

Perfect. Yes. Maybe following up on your comments there around the CDMO drivers within the Pharma segment in China. Can you just remind us what does your CDMO customer base look like in the region? Is it pretty broad-based? Or is it mainly focused on some of the larger players like Wuxi in the region?

A mix, but mostly large now, right? It used to be large and small, but with the Biosecure Act, I mean the small on sort of were not viable anymore, but it's mostly large ones. We have deep relationships with the names that you mentioned. I mean there's also Pharmaron, there's Wuxi. There's also some large pharma who do -- a large pharma in China who do contract manufacturing themselves. So very, very good relationships.

And again, remember, I think back in 2021, early 2021, we had flipped Wuxi from a competitor to us. It went from 80-20 of a competitor to 80-20 Waters, and we've maintained that share. So we feel extremely good about it.

Okay. That's helpful context. Maybe shifting to India. India grew double digits in the second quarter. It grew roughly 20% in the first quarter as well. You've talked about how you expect that the generics opportunity in India will contribute 70 to 100 basis points annually that you mentioned at the Analyst Day. So with this in mind, can you discuss some of the competitive dynamics in India for the generics opportunity? And then how should we think about the tariff dynamic in India impacting this opportunity, if at all?

Yes. I mean, again, quantitative and qualitative. So let me start with the qualitative this time. We have deep relationships with the top generics players in India. I mean -- and these folks have, of course, some of them have sites in the United States and Canada as well. They're very close to the tariff discussion between the U.S. and India. There is no impact on this industry per se, especially the export generics industry, and they are very confident in their CapEx investment.

So we're very close to these customers. And I would say, I mean, our GM talks to them on a weekly basis, I talk to them on a monthly basis, and I have a first-time view that we are not seeing any pressure on CapEx investments for generics to support the upcoming patent cliffs. So that's the first piece.

The second quantitatively, yes, India has been growing in the high teens for a while now. And we don't see the funnel support strong growth for the back half of the year as well. So quantitatively, we don't see any challenge. Now we're very close to all the discussions that are taking place between the U.S. and India. I think the discussion largely, Rachel, focuses on the agriculture and dairy segments and not as much the pharma and generics segment.

The pharma discussion is largely taking place with the U.S. and large pharmaceutical companies with MFN, not with the generics industry per se in mind, right? So I think we sometimes sort of lump pharma into one. It's a different discussion with large pharma, different discussion with generics, which are not being sort of -- not being impacted.

With India and the U.S., it's largely a discussion on agriculture and dairy products and both of which are politically important for both countries given the population that is involved, right? So I think just important to be specific on that front, but we're very close to the details there. So I feel very good about our position and our forecast in India.

Great. That's helpful. Maybe in the final minute or 2 here, Udit, can you just provide us with any final takeaways? And what do you think is the most underappreciated aspect of the Waters story here?

Look, I mean -- thank you, firstly, for giving us the time to talk about it today. I think firstly, we feel very fortunate in terms of where we stand as Waters stand-alone. How our strategy is working, how the execution is really now kicking into good gear, and we're able to sort of offset any challenges that we see geopolitically, geographically, and this has a lot to do with the team's resilience. So I think that has been understood reasonably well.

And yes, we discussed the replacement cycle, chemistry, et cetera, again and again, but I think overall, that's well understood. The potential of the BD transaction, I think, is getting better and better appreciated. I feel good about the discussions we've had with several investors and several of our large investors. As we provide more detail and as people get more comfortable with the -- as time passes and people get more comfortable with their own analysis, I mean, there is a tremendous value creation potential here to create a leading innovation-driven life science tools and diagnostics company, which basically is able to withstand even more turbulence than what a stand-alone has been able to do.

So I feel very good about the discussions we've had. And as the story gets appreciated, I'm sure more and more folks will see an opportunity to come in and support us. So I want to again thank you for the opportunity. Thank you for the forum, and thank you for your questions. I hope it was helpful.

Perfect. Yes. With that, we are unfortunately out of time. So thank you so much again, Udit, for joining us today, and thank you for everyone on the line as well. Please feel free to reach out if you have any follow-up questions.

Thank you, Rachel. Thanks, everyone. Bye-bye.

Bye.

This concludes today's call. Thank you for joining. You may now disconnect your lines.

Welcome to the Waters Corporation Second Quarter 2025 Financial Results Conference Call. [Operator Instructions] It is now my pleasure to turn the call over to Mr. Caspar Tudor, Head of Investor Relations. Please go ahead, sir.

Thank you, Layla, and good morning, everyone. Welcome to Corporation's second quarter earnings call. Joining me today are Dr. Udit Batra, our President and Chief Executive Officer, and Amol Chaubal, our Senior Vice President and Chief Financial Officer. Before we begin, I'll cover the cautionary language. In this conference call, we will make forward-looking statements regarding future events or future financial performance of the company. We will provide guidance regarding possible future results as well as commentary on potential market and business conditions that may impact Waters Corporation during 2025 and beyond.

Additionally, we will comment on the expected timing for completion of Waters pending combination with the Biosciences and Diagnostic Solutions business of Becton, Dickinson & Company as well as the expected financial and operational impact of this combination on Waters.

These statements are only our present expectations based on information available to us as of today as well as forecasts and assumptions of Waters management and are subject to risks and uncertainties, many of which are outside Waters' control. Actual events or results may differ materially from the statements made on today's call. Please see the risk factors included within our Form 10-K, our Form 10-Qs, our other SEC filings and the cautionary language included in this morning's earnings release.

During today's call, we will refer to certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP measures are attached to our earnings release and in the appendix of the slide presentation accompanying today's call. Both are available on the Investor Relations section of our website. Unless stated otherwise, references to quarterly results increasing or decreasing are in comparison to the second quarter of fiscal year 2024. In addition, unless stated otherwise, all year-over-year revenue growth rates and ranges given on today's call on a comparable constant currency basis. Finally, we do not intend to update our guidance predictions or projections, except as part of a regularly scheduled earnings release or as otherwise required by law.

On today's call, Udit will begin by covering our key messages for the quarter. Amol will then take you through our results and updated guidance in more detail. After that, Udit will then share facts on key topics related to our pending combination with the BD Biosciences and Diagnostic Solutions business. Then we will open the phone line up for questions.

With that, I would now like to turn the call over to Udit.

Thank you, Caspar, and good morning, everyone. We're pleased to report another strong quarter with sales again above the high end of our guidance. This performance reflects strong execution, revitalized innovation and our successful expansion into higher growth areas, 3 strategic pillars we set in motion 5 years ago and continue to deliver with strength and resilience.

Sales grew 9% as reported and 8% in constant currency. Instruments grew mid-single digits, led by high single-digit growth in our LC and mass spec portfolio. Recurring revenue grew 11%, driven by 9% service growth and double-digit chemistry growth. Non-GAAP earnings per share were $2.95, up 12% year-on-year and above the midpoint of our guidance. GAAP EPS was $2.47. Sales growth was led by Waters Division, which grew in the high single digits or better across Americas, Europe and Asia.

In the Americas, this growth was partially offset by weakness in the TA division, in macro-sensitive polymer and materials testing applications. By end market, Pharma grew low double digits, led by strong instrument replacement activity and new product adoption particularly among large pharma and CDMO customers. In our nonpharma segments, Industrial grew 6% and academic and government performed better than expected, declining low single digits. Within recurring revenue, chemistry benefited from approximately $8 million of sales pulled forward in the second quarter related to tariff dynamics. Excluding this, our overall constant currency growth rate was 7% with chemistry up 10%.

These results reflect solid progress against our strategy, which has remained anchored in 3 core principles: First, commercial execution. We have driven consistently strong commercial execution across our organization in a highly systematized KPI-oriented approach. So far, in 2025, each of our key initiatives is ahead of expectations towards our 2030 targets.

In the first half of 2025 service plan attachment has risen 200 basis points to 52%, which already more than doubles our 100 basis point expansion objective for the year. E-commerce adoption continues to advance and is now comfortably above 40% of our chemistry revenue. We have also increased our CDMO penetration with contract organizations now at 27% of our pharma revenue.

Second, revitalizing our innovation. Our recent product launches continue to gain strong traction. Alliance iS sales grew 300% year-over-year in the quarter, while Xevo TQ Absolute platforms grew 40% and continue to lead the market with exceptional robustness and sensitivity. Customer response to the Xevo TQ Absolute XR has been outstanding, with Q2 orders more than double our expectations. Its robustness was recently demonstrated by one of our leading customers who was able to complete over 30,000 uninterrupted plasma injections.

MaxPeak premier columns, which represent high-performance chemistry for complex separations again, grew north of 30% in Q2. We recently launched our BioResolve Protein A Affinity Columns, marking the first set of affinity columns we have brought to market in bioseparations. Additionally, we have put light scattering on Empower ahead of target and customer sales are already coming in.

Third, capturing long-term growth accretion vectors in our core business and moving into high-growth adjacencies. Our idiosyncratic growth drivers have meaningfully outpaced our targets. In the first half of 2025, GLP testing revenue grew 70% year-over-year. PFAS testing revenue grew over 50% year-over-year and India revenues grew in the high teens. We also delivered 200 basis points of price contribution both in the quarter and for the first half of the year. We're proud of Waters' progress and are continuing to see robust momentum in our business.

With that in mind, we're raising our full year 2025 constant currency sales growth guidance to 5.5% to 7.5% and raising our full year 2025 non-GAAP EPS guidance to $12.95 to $13.05.

I will now turn the call over to Amol to cover our financial results in more detail and provide further details on our guidance.

Thank you, Udit, and good morning, everyone. In the second quarter, we delivered sales of $771 million, up 9% as reported and 8% in constant currency. Orders outpaced sales reflecting solid momentum and setting us up well for further strength in the second half of the year. By end market, performance was led by Pharma, which grew 11% and Industrial, which grew 6%. Academic and government declined 3%. In Pharma, the Americas, Europe and Asia each grew double digits. In Industrial, Waters Division grew mid-teens with strong growth in food and environmental testing. PFAS-related applications again grew significantly, up more than 30% in the quarter. TA declined 6% due to softness in Americas and Europe, for macro sensitive segments such as materials and polymer testing.

In ANG, we executed well and stayed close to our customers, delivering a resilient outcome. The Americas declined low single digits, which was better than reflected in our assumptions. China ANG grew high single digits as we leverage our local presence and new product innovations to win stimulus tender opportunities.

By region, Europe grew 8%, Asia grew 14%, driven by double-digit growth in China, India and Japan. The Americas grew 2% as low double-digit pharma growth was partially offset by softness in TA and academic and government. By product line, instrument sales grew 4% led by high single-digit growth in LC and MaxPeak systems as new product demand and replacement trends remain robust.

Recurring revenue grew low double digits with service up 9% and chemistry up 16%. In the quarter, chemistry benefited from approximately $8 million of sales pulled forward. Adjusted earnings per share were $2.95, representing 12% growth or 11% growth on a constant currency basis. GAAP earnings per share were $2.47. Gross margin for the quarter was 58.3%, and adjusted operating margin was 29.1%, reflecting the impact of regional sales mix and margin dilution from tariff surcharges. Our operating tax rate came in at 17.9% due to jurisdictional mix and discrete items specific to the quarter, creating a $0.05 headwind to adjusted EPS. We expect this to normalize in the second half of the year.

Free cash flow was $159 million after funding $23 million of capital expenditures. In the quarter, we made $120 million of U.S. tax reform payment and paid other items totaling $20 million. Our net debt position at the end of the quarter was $1.1 billion. Looking ahead, we plan to use our free cash flow to pay down $100 million of debt and add to our cash position in the second half of the year.

Now I will share further commentary on our full year outlook and provide our third quarter guidance. We are executing well across our commercial priorities and momentum remains robust. Given these dynamics, we are raising our full year constant currency sales growth guidance to 5.5% to 7.5%. We are also raising our reported sales growth guidance now to the range of 5% to 7%.

We expect full year 2025 gross margin to be approximately 59% and adjusted operating margin to be approximately 31%. Below the line, we expect $40 million of net interest expense, 59.7 million average diluted share count and a 16.7% tax rate. With our strong sales momentum, we are also raising our EPS guidance. We now expect full year 2025 adjusted earnings per fully diluted share to be in the range of $12.95 to $13.05. This is approximately 9% to 10% growth.

While the current tariff landscape has improved versus our prior guidance assumptions, given the continued variability of tariffs and trade policy environment, our tariff impact outlook for the second half of 2025 is unchanged. If tariff rates were to remain only at current levels, there is approximately $0.06 of upside to our full year adjusted EPS guidance.

Turning to the third quarter of 2025, we expect constant currency sales growth of 5% to 7%. Net of currency translations reported sales growth is expected to be in the range of 4.5% to 6.5%. For EPS, we anticipate our third quarter adjusted earnings per fully diluted share to be in the range of $3.15 and $3.25. This represents approximately 8% to 11% growth.

With that, I will now hand it back to Udit.

Thank you, Amol. The momentum in our core business remains strong. This trend provides the foundation for the next phase of growth as we combine with BD's Biosciences and Diagnostic Solutions business. Consistent with our strategy, the transaction accelerates our entry into multiple high-growth adjacencies. It also extends the reach of our proven execution model into other attractive high-volume segments. The combined company anchored by leading brands generating 80% of the revenue and a 70% annual recurring base create a powerful engine for consistent growth and will drive resilience across future CapEx cycles. Paired with highly attained cost and revenue synergies, this positions the company for an impressive financial trajectory with 7% top line and mid-teens adjusted EPS annualized CAGR growth on a combined company basis.

I will now share some facts that address several key questions we have been getting from the investor community. Covering, first, our growth assumptions for BD Biosciences and Diagnostic Solutions on a stand-alone basis; second, our assumptions behind the cost and revenue synergies; third, the fit and quality of the microbiology business and the value creation upside opportunity that it holds; and fourth, integration leadership. Beginning with our growth assumptions for the BD Bioscience and diagnostic solutions on a stand-alone basis.

From fiscal year 2019 to 2024, BD's Biosciences and Diagnostics businesses grew at a combined 5% CAGR driven by approximately 5.5% growth in Biosciences and 4.5% in diagnostics. The Biosciences figure includes the recent slowdown in drug discovery which has reduced CAGR growth by 150 basis points over this time frame. Adjusting for this, the underlying growth potential of the BD business is between 5.5% and 6% backed by long-term historical trends.

In recent quarters, the business has experienced 3 temporary growth headwinds: one, softness in pharma drug discovery and U.S. academic and government funding; two, a short-term supply disruption affecting the BACTEC microbiology platform; and three, a U.S. export ban on flow cytometry products to China. We believe that the BACTEC supply constraints have been alleviated with utilization ramping back up across sites. At the same time, U.S. export licenses have been reinstated across high parameter flow cytometry access to China, resolving this issue.

For pharma research and academic and government, we have taken a conservative approach in our growth rate assumptions to reflect ongoing industry headwinds. Our model prudently assumes a 40% decline in U.S. ANG funding through 2027 and flat revenue growth in pharma drug discovery in both 2026 and 2027 after the baseline is reset this year in 2025. Importantly, BD's Bioscience and diagnostic solutions exposure to U.S., ANG and pharma drug discovery is limited at a low-teens percentage of revenue.

Putting these facts together, we estimate that the underlying BD Biosciences and Diagnostic Solutions business will gradually return to growth through the rest of calendar year 2025. We expect a slight decline in the quarter ending June 30 with further sequential growth rate improvement and a return to positive growth in the second half of the calendar year, all of which is reflected in our model. We then expect it to reach 4.5% growth in 2026, 5% growth in 2027 before then progressing back to its historical growth rate of mid-single digit plus in 2028 and beyond.

When combined with a risk-adjusted $290 million in revenue synergies we've laid out, the expected total growth profile of BD Biosciences and Diagnostic Solutions is 7% on a CAGR basis. These synergies are evenly phased over the 5 years as commercial execution will kick into gear quickly while cross-selling and high-growth adjacencies will progressively phase in over time. We also see further upside to this growth as our model does not include growth contributions from much anticipated new product launches, which are expected to positively impact growth in BD's underlying business in 2026. This includes launches across the flow cytometry portfolio, the next-generation BACTEC launch in microbiology and other launches across the portfolio, all expected in 2026.

I recently visited BD San Jose site to see the new FACSDiscover S8 Flow Cytometer in action. It impressively combines spectral and real-time imaging technologies to analyze over 50 cell characteristics with exceptional resolution and sensitivity. Many customers had delayed flow purchases in anticipation of this significant innovation with availability now in market, orders are running well ahead of target, just 2 months post launch.

Now on to cost synergies and revenue synergies from this transaction. We expect to deliver $345 million in adjusted EBITDA synergies by year 5, driven by $200 million in cost by year 3 and $290 million in revenue synergies by year 5. The structure and execution plan behind these numbers gives us confidence in how actionable and achievable they are. On the cost side, the $200 million we outlined represents just under 5% of the combined company's cost base.

In my prior role, integrating EMD Millipore and Sigma-Aldrich, we delivered synergies equal to approximately 8% of the total cost base. If we simply match that outcome here, it would fully backstop our entire $345 million adjusted EBITDA synergy target with cost alone. And remember, more recently in 2023, Waters executed a 5% head count reduction in one quarter when demand softened, reducing spans and layers and aligning our cost base to match the changing realities of the market without compromising performance and growth. That same discipline underpins our synergy plans.

The $200 million in model cost synergies will come from 3 main areas: split across manufacturing and supply chain, commercial infrastructure and indirect procurement savings. In manufacturing and supply chain, we expect to generate approximately $80 million in savings with $40 million driven by site rationalization. A further $30 million comes from direct procurement savings, which amounts to just 2.5% of our direct material spend compared to a market benchmark of 5%. The remaining $10 million comes from freight lane optimization, which does not include upside potential from additional sourcing leverage.

Commercial infrastructure service and technology streamlining are expected to contribute $75 million. Nearly half of these savings come from consolidating central functions inside sales and sales operations and do not impact quota-carrying reps or field service engineers. The other half reflects duplicative digital infrastructure and central service oversight as there is no need for multiple CRM systems, e-commerce stacks or service oversight organizations. The final $45 million comes from indirect procurement savings and efficiencies gained by leveraging our global capability center in India.

We've taken a deliberately conservative approach, assuming indirect procurement contributes just $20 million or less than 2% of the combined direct spend -- indirect spend. The remainder comes from in-sourcing outsourced services to our global capability center where we already deliver equivalent output at a fraction of the cost. Beyond that, we see meaningful potential upside through rebalancing roles currently concentrated in high-cost geographies across the globe into more cost-efficient hubs and regional low-cost centers offering additional flexibility and long-term scalability to the cost base.

On the revenue side, net of risk adjustment, we have mapped out a $290 million opportunity over 5 years that spans 3 clearly defined and execution-ready areas. This includes $150 million from commercial excellence, $115 million from high-growth adjacencies and $60 million from cross-selling. Commercial excellence is built on the same model that transformed Waters over the past 5 years. The BD business we are acquiring closely resembles where Waters stood in 2020. 30% of the installed base is due for replacement. 70% of revenue comes from reagents yet only a limited percentage flows through e-commerce and only 40% of the installed base is covered under a service plan. These are all levers we pulled at Waters with dramatic impact.

By applying the same playbook to BD, we believe that $115 million is fully within reach. For example, increasing e-commerce attachment by 20% on BD's $1.8 billion reagents business, like we have achieved with Waters, unlocks an estimated $75 million in additional revenue alone. This math is based on what we have seen firsthand at Waters, where an incremental dollar is generated for every $5 shifted to digital. The next $115 million comes from 3 high-growth adjacencies, bioanalytical characterization, bio separations and mass spec in diagnostics, each contributing $35 million to $40 million.

In bioanalytical characterization, flow cytometry and PCR are playing a growing role in large molecule QA/QC testing, bringing these technologies on to Empower will immediately enhance their capabilities and utility in regulated labs like how we integrated Wyatt earlier this year. For prudence, our $40 million revenue synergy estimate only reflects adoption in process development labs and does not include the larger QA/QC opportunity. Meanwhile, we know firsthand that a leading cell therapy manufacturer is actively looking to deploy flow cytometry in QA/QC for production, but has been held back by the lack of compliance, enabling informatics like Empower.

In Bioseparations, traditional chemistry is reaching its limits for large molecule applications, where biological specificity is needed and requires antibodies. In response, we recently launched our BioResolve Protein A Affinity Columns. BD's deep antibody library will accelerate our product road map, unlocking multiple projects with joint innovation that we could not advance alone and creating an estimated $35 million in new opportunities.

In diagnostics, upstream proteomics is identifying new biomarkers for early disease detection and residual disease monitoring as the field advances mass spec is becoming an essential tool for multiplex diagnostics. This trend is validated by a leading diagnostics company integrating mass spec into its high-throughput platform. Through BD, we gained immediate access to a global network of specialty diagnostic labs, supported by a service infrastructure offering 24-hour premium plans. This channel and service capability alone supports a $40 million revenue opportunity for us.

Beyond this, BD's strength in regulatory, assay development and automation provide a platform to scale and expand our mass spec diagnostics menu. None of this upside is reflected in our base case assumptions.

Finally, cross-selling is another significant revenue opportunity. BD's strong presence in Pharma Clinical Labs gives Waters access to customers we have historically struggled to reach. This is especially relevant in DMPK, where our TQ Absolute mass spec platform outperforms competitors, but has lacked penetration due to limited channel access. We estimate this opportunity at $60 million in Pharma DMPK alone and have not counted cross-selling opportunities in other lab settings.

Further, our cross-selling assumptions do not include any contribution from mass spec for identification in microbiology labs or pharmas sterility testing in QA/QC applications, which are 2 areas I will cover in a moment. These revenue synergies, combined with the return of BD business to more normalized growth gives us a strong level of conviction in delivering on the financial plan presented at the announcement of the transaction with a 7% revenue CAGR and a mid-teens adjusted EPS growth CAGR between 2025 and 2030.

Now I will cover the fit and quality of the microbiology business and the value creation upside opportunity that it holds. First, the quality of the assets we are bringing from BD into Waters are exceptional, especially in flow cytometry and microbiology. BD is a pioneer in flow cytometry and has consistently driven innovation and enabled critical advances across oncology, rare disease and immune health. It has a well-adopted presence in midstream pharma settings such as clinical labs and is increasingly moving downstream into manufacturing. Considering our premier position in downstream, the logic for this part of the business is very apparent.

What is less apparent at first glance, though is the incredible strategic fit of the microbiology business, which is equally as compelling and holds significant value creation opportunity. BD is a leader in microbiology with a legacy of first in infectious disease diagnostics and is an innovative provider of total workflow solutions for clinical labs. Approximately 2/3 of BD's $1.8 billion diagnostic solutions business comes from microbiology.

It benefits from consistent growth trends tied to infectious disease testing, anti-microbial resistance monitoring and increasing demand for lab automation. With its large installed base and strong brand recognition, we see a clear opportunity to enhance the performance of the microbiology business by uplifting its commercial execution and operational performance. This is particularly relevant because its revenue growth rate has trailed the competition by 180 basis points on a CAGR basis between 2019 and 2024, according to publicly available information.

We faced a similar situation at Waters 5 years ago through focused and disciplined execution, we have since delivered outperformance versus the industry. Now based on our extensive diligence, we are confident we can repeat the success here. And the timing of this opportunity is particularly relevant with the launch of the next-generation BACTEC System next year in 2026. Together with our execution, this will offer an added innovation catalyst for system replacements and microbiology labs.

At the same time, the microbiology business has a highly actionable 700 basis points gross margin expansion opportunity. This presents clear potential to add further value creation by applying Waters operational rigor and is not included in our underwriting model. Additionally, we see 2 potential growth vectors that are uniquely suited to Waters and microbiology that are not included in our revenue synergy assumptions.

First is mass spec for microbial identification, which is an attractive $500 million TAM, growing high single digits that Waters does not serve today. By combining Waters strength in mass spec with BD's significant installed base and sales channel across over 10,000 clinical labs, we are well positioned to attach our mass specs to BD systems and enter this space. This is similar to how we have successfully attached our LCs to wires multi-angle light scattering detectors.

Second, microbiology is a critical QA/QC in pharmaceutical manufacturing for sterility testing, yet neither BD nor Waters currently serves this segment. BD has the right product portfolio but has lacked channel access or expertise in manufacturing environments. Waters brings long-standing relationships and credibility in these regulated settings. Together, we can unlock this untapped $300 million market, growing at a high single-digit rate and establish a strong presence in this attractive QA/QC segment.

Finally, I will discuss integration. Over the last 5 years, we have assembled a leadership team with deep experience in transformation and large integrations. I am pleased to announce that Chris Ross, currently Senior Vice President of Global Operations at Waters, will lead the integration office of our combined -- of our combination with BD's Bioscience and Diagnostic Solutions business.

Chris brings extensive experience in large-scale integrations, having worked with me on the EMD Millipore Sigma-Aldrich merger which was the largest merger in life science tools at the time and delivered record sales growth and margin development. His proven ability to unify teams, integrate complex organizations and deliver outstanding results makes him exceptionally well suited to lead this critical task.

With that, I will turn the call back to Caspar.

Thanks, Udit. And that concludes our prepared remarks. We are now happy to open the lines and take your own questions.

[Operator Instructions] Our first question will come from Jack Meehan with Nephron.

I appreciate all the color on the quarter and the deal here. First question is on the quarter, just the high single-digit growth in Waters segment instruments that you put up, could you unpack for us what you're seeing just an update in terms of the replacement cycle in LC and then also competitive dynamics seems like Alliance iS is doing well, but any color on what you're seeing in terms of new wins would be helpful?

Jack, thank you for your question. Look, LCMS continued to grow high single digits, and it grew both across pharma and the industrial segments. In pharma, the replacement cycle is going just as planned. We're seeing excellent replacement across large pharma customers, especially in the U.S. and Europe as well as increasing growth in the CDMO customer base and the genetics customer base, right? So LC is growing very nicely. And of course, it's aided by Alliance iS, which grew 300% versus the same quarter last year. So really, really great progress on that front.

On the mass spec side, PFAS testing continues to augment the growth. And more importantly, we recently introduced our TQ Absolute XR instrument. This basically takes the highest level of sensitivity in the market that is available with the TQ Absolute and extends its robustness. Our customer recently basically took plasma samples and was able to inject 30,000 injections without having to service the instrument. That number has gone from 3,000 to 30,000, right? So really significant improvement in robustness and it allowed us to enter the DMPK laboratories for this customer. So really pleased with LCMS progress aided by the new product introductions.

Great. And then one on the deal, I feel like over the last few weeks, this -- trying to unpack the -- these areas where one plus one is greater than 2 and the mass spec and MALDI has -- for microbiology has been getting a ton of attention. Can you just talk about like -- I don't know if there's any color you can share on rough time line to bring a new product to market? What you can do today in advance of a deal closing? And then just kind of the importance of the FDA strategy? Any color on all those points would be great.

Yes. It's a great question, Jack. Look, I mean, first, I'll remind you that none of what we talked about on microbiology is included in the deal model, right, neither the operational turnaround, nor the gross margin expansion and not the MALDI TOF opportunity that you just mentioned. Now when we started looking at this business, our team got super excited because we have a whole bunch of mass spec experts sitting in the U.K. who've actually looked at this close to a decade ago. So they have blueprints from that time that they quickly dusted off and said, hey, we can do this. And we said, no, no, no, let's take a step back and understand all the various opportunities that we have to redefine microbiology and identification of microbes and integration into the BD workflow, right?

So this is work that will take a few years, right, say, 3 to 5 years to reach fruition. At the earliest one could introduce a product, say, 2 to 3 years, at the latest probably 4 to 5 years. But super exciting opportunity. I think the TAM is what, roughly around $400 million to $500 million. So I wouldn't get excited that something comes tomorrow, but our teams, I can tell you, are very excited with the opportunity.

And just to add to that, right, I mean, we shouldn't discount the biologic sterility opportunity. That's pretty meaningful. It's a channel that we completely own in manufacturing QA/QC and their timing could be even earlier.

Your next question will come from Tycho Peterson with Jefferies.

I want to probe a little more to the LCMS growth of high single digits. You were up mid-teens in the first quarter. It sounds like you're not calling any kind of slowdown in the replacement cycle, given MFN tariffs. But as you head into more difficult comps in the back half of the year, I'm just curious if you could kind of lay out what you're expecting? And then anything we should assume from Xevo XR from the ASMS launch? And then separately, can you also touch on TA down 20% in the Americas? And maybe just give us a back story there?

Sure, sure. So I'll start, and I'll let Amol talk about the assumptions for the back half of the year. Tycho, really pleased with the replacement cycle. I mean, our downstream presence in pharma in QA/QC and late-stage development in CDMOs and genetics really allows us to leverage the replacement cycle, and it's generally insulated with any discussions from MFN or any other trends. We're not seeing any slowdown across genetics or large pharma and in fact CDMOs are picking up quite nicely.

Second, you asked about the TQ XR growing super, super well. I mean customers are -- I mean, it's exceeded all our expectations. In fact, over the last 5 years, this has been the fastest launch of a new product and we've had really terrific launches in the last 5 years. And as I mentioned, customers, especially in DMPK who use rather dirty samples for plasma have been able to go from 3,000 injections to about 30,000. For the first time, it allowed us to displace a competitor in a pharma DMPK laboratory with that sort of performance. So very pleased.

And let me just comment on TA for a minute, and then I'm going to hand it over to Amol to talk about the back half of the year and the assumptions. On the TA side, look, I mean the macroeconomic conditions and the tariff challenges have impacted, especially in the U.S. and some parts of Europe, the material science and polymers customers. And they slowed down spending in TA, and that led to, especially in the U.S., a decline of roughly 20% in our TA business. Long term, this is a fantastic business with great margins. I think in the short term, there is a challenge, especially with this customer segment, which happens to be the largest one in the U.S. Amol?

Yes. And so for the back half we're not expecting things to slow down, right? I mean on the recurring revenue, our overall assumption is slightly under 7% growth, and that's driven by 2 things. One is there is one extra day in the second half of the year. That's about $5 million less the true-up of the $8 million of pull forward from the first half. On instrument, just like we've done throughout the year, we go in with a 5% assumption, knowing well that our momentum is well above that. And so we sort of derisk our assumption for the remainder of the year. So we haven't carried forward the momentum that we are seeing in the first half into our second half guide. And there, you will see our Q3 to Q4 ramp is also consistent with what we achieved last year.

And just one other comment on as we look ahead. I mean the funnels, especially in large pharma, in CDMOs, in generics are extremely strong. right? And so we're very confident that this trend of replacement and growth in downstream QA/QC segments continues.

Okay. That's helpful. And then for the follow-up, can you comment on China. You had a nice acceleration on a harder comp. How sustainable is that? You talked about some new initiatives? Maybe just highlight -- and I didn't hear you call out stimulus. So it doesn't sound like that contributed.

Yes. So China grew double digits this quarter, right? I mean, it came in ahead of expectations with strength across all end markets, right? So let's start with TA since it was in the penalty box in the U.S. The Industrial segment grew double digits behind TA's success in the battery segment. The A&G segment benefited from a modest impact of the stimulus, but equally continues to benefit from the localization of our portfolio and grew high single digits.

And pharma was a standout grew double digits and had terrific growth, especially in CDMOs. In fact, Tycho, we had 8 of our top Chinese customers here at our headquarters for 4 days of workshops. And this range from CDMO customers from customers who are in large pharma in China, and they really wanted to study our new product portfolio, especially our chemistry -- especially our column chemistries and how they're relevant for large molecules as the biotech industry picks up in China and equally looking at our revitalized instrument portfolio across Alliance iS as well as mass spec bodes really well for what we expect going forward in China.

But that said, we've still been -- as usual, we've been a bit prudent for the back half of the year in our assumptions. We're still assuming low to mid-single-digit growth for China for the back half of the year and very modest stimulus impact while we know there's another stimulus coming, especially for the custom segment.

Yes. Just to add, I mean, look, AMG was up 8% in China. The only weak spot in China by far is branded generics, LC replacement. That hasn't kicked in, which is what we've said throughout the year, and we expect it to slowly ramp in and will sort of phase out in the next few quarters.

Your next question will come from Rachel Vatnsdal with JPMorgan.

So I want to dig into a little bit on the margin side. It looks like recurring revenues were solid in the quarter, but that operating margin was a little bit lighter than what Street was expecting. So can you unpack some of the drivers there for us? Was there anything in terms of some of the tariff dynamic that we should be aware of? And does that also make it where you're seeing this operating margin be a little bit lighter in that low 30s percent range in the third quarter? And then how should we think about that margin evolving into fourth quarter? Because it looks like there's a decent size step up there.

Yes. So look, I mean, Rachel, most of the margin impact was on the gross margin line, and it was a combination of 2 things. One is just a geographical mix and the other is we incurred some costs associated with tariff remediation that sets us up really well for the second half of the year. But if you look at it from an EPS point of view, most of the EPS headwind really came in from the tax rate. And that was almost $0.05 headwind on the EPS during the quarter. And that's very specific to the quarter in terms of discrete items that are specific, and we think over the second half of the year, that will even out.

In terms of the margin, we will see progressive improvement in margin as we go through Q3 and Q4 versus last year. And again, in Q4, as you know, volume leverage kicks in.

Perfect. And then for my follow-up, I just wanted to ask on some of the pull-forward comments that you made. So you called out that there was roughly $8 million of pull forward in the quarter. Can you walk us through your conviction that it was just that level and some of the moving pieces on that front? And then should we fully take that out of the third quarter? Or is that coming out of the back half overall for a net neutral impact for the year?

Yes. So I mean, look, we've looked into the order patterns we've discussed with customers that gives us a great sense of conviction that $8 million is the level of pull forward in these numbers. It's hard to predict whether it will come out of Q3 or Q4 or may not even come out of this year at all because some of it was associated with things people have produced while other is sort of people proactively building their safety stocks, right? So prudently in our guide, we assume that it comes out evenly out of Q3 and Q4, but it remains to be seen whether it does.

Your next question will come from Puneet Souda with Leerink.

Congrats on the quarter here. On the -- I know academic is small for you. There was improvement in the NIH sentiment overall with the standard appropriations. But just wondering, instrumentation side, how do you expect that to -- are you expecting any of that in the fourth quarter? How do you expect that to help with the high-end instrumentation maybe in '26?

Yes. So Puneet, thank you for your question. Look, ANG grew -- sort of declined minus 3% this quarter, which was ahead of our expectations. And the NIH funding impact was not as significant as we had assumed. We have still been quite conservative for the back half of the year and assume that the decline continues at the high single-digit-ish sort of range for the balance of the year. And that's for the global -- globally and in ANG in the U.S., a bit stronger. ANG, in particular, in China, did extremely well, high single-digit growth, and some of that had to do with the localization of our portfolio, and there was a modest stimulus impact.

But not assuming any sort of funding return in our baseline for the second half of the year in academic and government. And yes, we've been reading the same headlines you have. It's gone from 40% reduction to 10%, maybe flat, but we have not assumed any sort of funding that would come back at this stage.

Got it. Okay. And then as we think about '26, you gave the 4.5 point growth number for the year. As you think about the $290 million synergy plan, could you talk about the sequence of an order or a sequence of events that you want to focus on e-commerce service attachment, instrumentation replacement sort of how should we think about that contributing after the acquisition does close in early 2026?

Yes. So the beauty of this transaction is that we can immediately apply what we've been working on at Waters for the last 5 years, right? I mean you will see on day one an impact of instrument replacement as new products have come across flow as well as microbiology, right? So you'll see immediate impact of basically taking our instrument replacement discipline occurring in sort of the first couple of months.

Second, we'll start to see an immediate impact on the service attach rate. I mean, this is stuff that we do now day in, day out at Waters and we're starting at a 40% service attach rate for a pretty nicely installed instrument base.

And third, on e-commerce, there's a very significant potential, right? And we've gone from less than 20% to over 40% at Waters. And there we expect to again immediately see impact, right? So these are 3 operational things that should provide -- help us hit the ground running.

And then when you look at the other categories, for LCMS and diagnostics, all we've assumed is that we have access to a larger service team and a larger commercial team that allows us to get into every laboratory -- every specialty diagnostics laboratory where mass spec belongs. This is something that we don't have today. That should hit the ground running quickly.

Second, we've assumed that flow and PCR belong in every process development lab globally and where we have access as Waters, but BD doesn't. And again, this is something that should impact us really quickly. And then finally, on the microbiology segment, we feel that the imminent opportunity to take microbiology into QA/QC, into sterile testing laboratories is also imminent, right? So several of these things we will be able to implement on day one and take just the discipline that we have at Waters and apply it.

I'll let Amol comment on the sort of reconciling it with the assumptions that we made from a revenue perspective and how much upside there is?

Yes. I mean, look, at the end of the day, as we outlined, there's just a couple of things in there that will take a little bit of time like the bioseparations columns, and then mobilizing the channel on the DMPK effort. And then keep in mind there are additional opportunities that we laid out. So in general, we believe a straight-line approach over the 5 years is a reasonable assumption on these synergies.

Your next question will come from Sung Ji Nam with Scotiabank.

Just curious about your drug discovery business out -- for your pharma end market, recognizing that's a very small part of your business. Just kind of curious how that's been performing and what the outlook might be? Just trying to get a sense of the whole market dynamic for the biotech pharma spending.

Yes. So look, broadly speaking, the market situation has largely not changed what we had outlined before. Pharma drug discovery, which is about 5% of our pharma revenue, remains slow. Biotechs remained slow. And replacement cycle hasn't kicked in, in this segment even when fleets have aged. And broadly speaking, there are 3 subsegments within pharma, where replacement cycle hasn't kicked in. Pharma drug discovery, CROs and branded generics in China.

Versus, on the other hand, large pharmas, CDMOs, we're seeing healthy replacement cycle, healthy funnel activity and healthy order conversion.

Got you. And then just a follow-up in terms of tariffs, it sounds like you guys are building quite a bit of cushion there for the second half. Was curious about tariffs, specifically with India currently, just assuming that's not affecting your generics business or currently, obviously, and then for the foreseeable future, kind of what's your outlook there? I know there was a question earlier regarding kind of the pharma tariffs, MFNs and things like that. But just kind of curious what the expectations are currently?

Yes. I mean right now, the funnel activity in India is very healthy and customers are ramping up capacity, particularly for the semiglutide generics opportunity as well as for the upcoming patent cliffs within small molecule. We're not seeing the level of fear with our customer base associated with the tariffs and their general expectation is payers will cover the impact or if there are financial incentives offered, they will leverage those financial incentives.

Yes. I mean, so far, Sung Ji, just to build on that, so far, I mean, we're very close to customers -- the generics customers in India. They visit our sites quite often. And I know several of the CEOs very well, right? So look, none of them at this point, has heard or seen any impact on their business, and they're ramping up like they have in the past. Even if there is a tariff that gets implemented on India, I think the expectation is that it's mostly on the farming community and the generics community, which is basically exporting medicines to the United States are one of the big contributors to lowering cost of medicines in the U.S. So we don't expect that to be hit. The customers have not seen any impact at all so far, and they're ramping up nicely.

Your next question will come from Catherine Schulte with Baird.

Maybe first just on the synergies -- on the $115 million revenue synergies from the commercial excellence initiatives, how much of that is from biosciences versus the diagnostic side? And maybe how does that vary by the 3-year sub areas?

Yes. Look, I mean instrument replacement is largely on the biosciences side, versus the e-commerce potential as well as the service attached potential spread across both the businesses.

Okay. Got it. And when you talk about repeating the success you've had at Waters with the microbiology business, what makes you confident that the underperformance issues that they've seen are similar in that case and there aren't different dynamics there in terms of competition or from a technology platform standpoint?

So look, I mean, that's a great question. I mean, we've not -- I'll remind you, we've not underwritten that in any of the synergies we've outlined. But that said, there's 180 basis points difference between the other competitor in the market versus BD in the microbiology space, right, in terms of growth. About 100 basis points comes from pricing, right? BD has been quite conservative just given the portfolio was older.

We expect the BACTEC launch, which, again, I have seen personally the BACTEC instrument in operation and the automated platform and operation of the Baltimore site, of BD, it's fantastic. It's a leap forward in the segment, and that should allow us to command better pricing. And that's more than half of the gap. And the remaining 80 basis points, we feel comes from the operational initiatives that you just asked about on the service attach and equally on e-commerce, right? So we feel adding those on to the 100 basis points in pricing with a new product, you should see additional penetration.

And on the gross margin side, BD has already planned that they're already implementing to improve the gross margin. The gap is about 700 basis points versus the key competitor, and we just plan to accelerate that plan that's already in motion. So rather tactical initiatives that one should be able to get going immediately.

And then again, on the 2 synergies, taking microbiology to QA/QC for sterile manufacturing as well as developing a mass spec platform that basically fits into the workflow for microbiology for micro identification is something, again, we haven't put into the plan. So feel very good about where we will start. and see a lot of strategic merits to taking it forward.

And I think in general, I mean, you referred to the last 5 years of Waters, I mean, you know us well. I mean we're pretty transparent about the KPIs we use. I mean -- so the next 5 years will be like the previous 5 years, where we'll state the 5, 6 KPIs. And every quarter, in a boring way, we'll show you progress against it. So nothing if you're not fact-based and somewhat boring.

Your next question will come from Dan Brennan with TD Cowen.

Maybe just one, just back to LCMS, Udit and Amol, I know we've talked about earlier. So what's kind of assumed in the back half of the year there? Any color? I know you talked about book-to-bill ahead of one there? Anything on the funnel to support that because while the high single-digit growth is impressive it is off a higher growth in the first quarter, so just trying to understand the trend there.

The funnels are exceptional, Dan. And it's especially across large pharma, CDMOs, which are picking up activity across U.S., across China, and generics in India continues to contribute, right? So that's on the LC side. On the mass spec side, I mean, the TQ Absolute and the TQ Absolute XR now have terrific, terrific reception from customers across PFAS testing and now increasingly across plasma testing in DMPK laboratories in a segment we hadn't been able to penetrate in the past. So I feel extremely good about both the demand that we see in our funnels and the differentiation of the product portfolio that is meeting these demands.

And I mean, overall, like we've done through the year, it's assumed at 5% instrument growth, which is not reflective of the funnel strength and the momentum in our business and the ramp from Q3 to Q4 is also in line with last year. So that sort of derisks our outlook for the remainder of the year.

Okay. Great. And then maybe just one other. I know there was a question on China, obviously, a terrific quarter versus what you guys expected? And you maintain the guide you said for conservatism. Just is there anything in the quarter itself -- I know there's a bunch of things that went right. Anything in the quarter itself that would lead you to believe it was temporary? And I know you touched upon stimulus, but just wondering if you can elaborate a little bit more on kind of what you're seeing specifically there?

So I'll answer your stimulus question at the end. Let's start with pharma first. There's increasing CDMO activity. As I mentioned, the 8 of our top customers were visiting us and had 4 days of workshops looking at our product portfolio and they're very excited to support the biotech industry in China, and you know that, that's starting off a low base over the last couple of years after biosecure, the CDMO industry was under pressure. It's picking up life very nicely in China, and we have great market share there.

Second, on the Industrial segment, the battery testing is doing extremely well, where we saw in the U.S. and Europe slowdown in the plastics and Applied Materials segments. We're seeing strength in the battery segment in China that really strengthens the growth of the industrial segment there.

And in the ANG segment, it was high single-digit growth. Some of it had to do with the fact that we have a completely localized portfolio where high-res mass spec in particular, did extremely well, and there was a modest impact of the stimulus. Now going forward, the CDMO trends, the battery testing trends are going to continue. We've just sort of been a bit conservative to not just take 2 data points and start drawing a line.

And then the third piece is around academic and government, the local portfolio is doing well. The distribution is helping. There's a stimulus coming up. But again, we've sort of said, Hey, let's just be a bit conservative about what we are seeing in China so far? I hope that helps.

This concludes the Q&A portion of the call. I will now hand it back to Caspar.

Thank you, Layla. This concludes our call. We look forward to connecting with many of you at upcoming events and conferences.

Good morning. Welcome to the Waters and BD Biosciences and Diagnostic Solutions Announcement Conference Call. [Operator Instructions] This call is being recorded. [Operator Instructions]. It is now my pleasure to turn the call over to Mr. Caspar Tudor, Head of Investor Relations at Waters Corporation. Please go ahead, sir.

Thank you, Leila. Good morning, everyone, and thank you for joining us on short notice. Earlier today, we announced Waters combination with BD's Biosciences & Diagnostic Solutions business via a Reverse Morris Trust. I hope everyone has had the opportunity to review the press release we issued. We've also posted our slide deck presentation and additional materials to our respective Investor Relations websites. A replay of this call will be available shortly after its conclusion.

Before we begin, I would like to remind you that today's call may contain forward-looking statements. Actual results and future events may materially differ from these statements based on factors described in today's release in our investor presentation, the Risk Factors section of our Form 10-K and most recent 10-Q and in subsequent filings we make with the SEC as well as BD's most recent 10-K, 10-Q and other SEC filings. We do not undertake any duty to update forward-looking statements.

Today's call also contains certain non-GAAP financial measures. Please refer to our most recent earnings release and investor presentation for important disclosures regarding such measures. Additionally, in connection with the transaction, Waters intends to file with the SEC a registration statement, which will include a proxy statement containing important information regarding the transaction.

On the call today, Dr. Udit Batra, Waters' President and Chief Executive Officer; Tom Polen, BD, Chairman, CEO and President; Amol Chaubal, Waters' Senior Vice President and Chief Financial Officer; and Christopher DelOrefice, BD's Executive Vice President and Chief Financial Officer. After the prepared remarks, we will open the call up for Q&A.

I'll now turn the call over to Udit to begin today's presentation.

Thank you, Caspar, and good morning, everyone. We are thrilled to announce today that Waters has agreed to issue 39.2% of its shares to BD's shareholders and assume $4 billion of debt to acquire the BD Biosciences & Diagnostic Solutions business. This is a rare and powerful opportunity to unite two industry leaders with complementary capabilities, a legacy of pioneering science and a shared, deep-rooted culture of innovation.

Over many decades, both organizations have earned the trust of researchers, clinicians, manufacturers and regulators by developing technologies that define the categories that they have created and support science at scale, both reliably and consistently in high-volume regulated settings.

In fact, both Waters liquid chromatography and BD's flow cytometry instrumentation have supported Nobel Prize-winning research. That speaks volumes about the caliber of innovation embedded in both companies, which is at the core of this combination.

Today is about uniting those trends to create something even greater. Today's announcement is a significant value creation opportunity. It creates an innovation leader with robust financial strength, serving high-volume regulated applications with industry-leading brands.

For 2025, the combined company is expected to generate pro forma revenue of about $6.5 billion with adjusted EBITDA of approximately $2 billion. Around 10% of product sales will be spent on R&D, which will sustain the company's high caliber of innovation. The company will approximately have 16,000 employees and be headquartered in Milford, Massachusetts.

This combination positions us to deliver exceptional long-term benefits for customers and shareholders by uniting Waters' leadership, downstream -- in downstream analytical workflows with BD's strength in cellular analysis and diagnostics. There are four key reasons why this transaction stands out.

First, it significantly expands our opportunity set in large and attractive markets. The combination doubles our total addressable market to approximately $40 billion, spanning a broader range of durable, volume-driven end markets that grow 5% to 7% annually. These are areas where demand is tied to consistent growth drivers like pill count, infection rates and disease detection serving the needs of a global aging population.

Second, it offers an unparalleled strategic fit, allowing Waters to immediately apply its commercial tools while also advancing our stated strategic ambition in high-growth areas.

Third, the combination enhances the stability of our growth. Over 70% of revenue is annually recurring. In addition, over half of combined instrument revenue consists of routine replacement, which takes place after 5 to 10 years. The high degree of annual revenue recurrence results in a more resilient and predictable growth profile smoothing out capital purchasing cycles while retaining strong exposure to long-term growth drivers.

And fourth, the transaction supports an industry-leading financial outlook. We expect significant cost and revenue synergies, a rapid path to industry flagship margin levels and strong growth at both the top and bottom line. The combination is expected to deliver mid- to high single-digit revenue growth, mid-teens adjusted EPS growth as well as rapid EPS accretion and leading cash flow generation.

In short, this is a highly complementary combination from a strategic, operational and financial standpoint that is expected to create significant long-term value for our shareholders. We will now cover each of these value drivers in more detail.

This combination more than doubles Waters' total addressable market to $40 billion, up from $19 billion TAM. It also adds greater breadth across end markets and applications, reducing dependency on any single segment. A defining strength of the combined company is the unique focus on downstream regulated applications. These are nondiscretionary, high-volume workflows where testing is mandated by regulation or quality standards.

Demand is driven by stable growth factors such as global pill count, disease burden and routine safety testing across pharma and biopharma, food and environmental and diagnostics segments. The benefit of serving these applications is that associated demand is truly recurring and is tied to critical needs rather than discretionary budget cycles.

They also enable a strong financial profile and offer consistent growth across various market cycles, as you've seen with our chemistry and service business over the past several years.

In short, this combination places us at the center of some of the most attractive and durable end markets in science and health care. Combination creates a unique opportunity to deliver significant value across multiple dimensions all at the same time. It unlocks immediate commercial impact by enabling us to apply our proven execution pay book at greater scale.

We expect to create meaningful value within the Biosciences & Diagnostic Solutions business by deploying our core enterprise growth initiatives, just as we've done very successfully at Waters. This includes instrument replacement across an additional 70,000 installed base and increasing service plan attachment like the 800 basis point increase we've achieved at Waters over the past 5 years. It also includes improving e-commerce adoption across a larger consumables portfolio and driving new product launch excellence.

These are the same levers that have driven Waters' transformation, and we are confident in our ability to replicate that success here. At the same time, our customer bases are naturally complementary. Waters has expertise in downstream pharmaceutical applications and food and environmental workflows while BD Biosciences & Diagnostic Solutions has expertise in pharma, clinical and diagnostics. This presents attractive cross-selling opportunities such as for our Tandem quad mass spectrometers into pharma drug metabolism and pharmacokinetics.

Finally, the combination offers an unparalleled strategic fit as it enables us to accelerate our entry into several of our defined high-growth adjacencies, all simultaneously. This includes bio separations, bioanalytical characterizations and multiplex diagnostics.

One of the most compelling aspects of the combination is how it enhances our growth stability. If there's one thing we could all benefit from in the tool space, it's more consistency. This combination supports a more resilient and recurring growth while that would bridge CapEx cycles.

We're bringing together iconic brands with deep customer trust, which is an incredible starting base. Together, these brands will make up over 80% of the combined company's revenue. Each of these brands offer exceptional innovation that solves customers' unmet needs. This is sustained by an industry-leading R&D spend at 10% of product sales.

Together, the new Waters will derive approximately 70% of its revenue from annually recurring sources, which is a significant step-up from where we are today. Even on the instrument side, there is a high degree of recurrence as over half of this revenue will be linked to routine replacement, which takes place every 5 to 10 years. This high degree of recurring revenue will form a solid foundation of durability and predictability that will benefit us through various market conditions.

Let's now turn to the financial outlook for the combined company. First, let me set the stage. This combination brings together two strong and growing businesses. Waters has delivered mid-single-digit plus historical growth and currently has a growth potential into the high single digits over the near to midterm, which we outlined at our Investor Day earlier this year. BD's Biosciences & Diagnostic Solutions business has also historically grown at mid-single-digit plus with approximately 80% annual recurring revenue.

With this strong foundation and the benefit of approximately $290 million in expected revenue synergies, we view the combined company as having a solid and realistic mid- to high single-digit revenue growth profile over the near to midterm that investors can truly believe in. Importantly, the combination also offers a significant margin development opportunity. We expect to begin with an adjusted operating margin of approximately 27% and intend to expand that by around 500 basis points by 2030. This puts us on a rapid path to reaching industry flagship margins levels within just a few years.

Now with a more detailed look. The first thing to point out is that this transaction offers a compelling financial profile and yields outstanding financial benefits across every dimension. We see significant synergy potential with $200 million in cost savings expected by year 3 and $290 million in revenue synergies expected by year 5, driving strong value creation. Amol will discuss these synergies in more detail later in the call.

The combined company offers an industry-leading financial outlook with projected mid- to high single-digit annualized revenue growth and mid-teens annualized EPS growth through the end of the decade. We also expect the deal to be adjusted EPS accretive in year 1.

As I mentioned a moment ago, this financial outlook will place us at the top of the sector and comes with approximately 500 basis points of expected adjusted operating margin expansion over 5 years. Not only are the financial benefits compelling, but the transaction multiple is attractive at 13.8x with run rate synergies and 18.9x on a pre-synergy basis.

Finally, our balance sheet will remain healthy and flexible with rapid deleveraging supported by strong free cash flow generation. I will now hand it over to Tom to highlight the strength and trajectory of the BD Biosciences & Diagnostic Solutions business and share his thoughts on why this exciting opportunity is such a good fit.

Thank you, Udit, and hello, everyone. We are very pleased to be here with the Waters' team. We believe this transaction represents both a tremendous outcome for the Biosciences & Diagnostic Solutions business and create significant value for shareholders. Before I introduce the business in more detail, I want to share some background on BD's perspective and what led us here.

Earlier this year, following a comprehensive portfolio evaluation, BD announced its commitment to separate this business to enhance focus and unlock value. Since then, we conducted a thorough process engaging widely with a large number of interested parties and assessed all transaction options. I'm pleased to honor our commitment and deliver a strong outcome for our shareholders.

Ultimately, we determined that an RMT with Waters is the ideal structure to immediately unlock value for BD's shareholders and create a unique opportunity to participate in the upside of the combined company with a shared culture of pioneering science, complementary portfolios, commercial strengths and a strong financial profile.

We're extremely excited to be establishing a new leader in the life science tools industry. Additionally, this transaction also enables our shareholders to capture the tremendous long-term opportunity of the new BD, which will be a scaled pure-play med tech leader with enhanced focus, greater opportunity to drive growth investments and accretive capital allocation opportunities.

Turning to the businesses. BD Biosciences is the undisputed pioneer that invented the modern field of flow cytometry, helping scientists revolutionize our understanding of cell biology in the fields of cancer, infectious disease and immune health, enabling countless breakthrough therapies. BD Diagnostics Solutions is a pioneer in microbiology research and clinical diagnostics with multiple world firsts in advancing the diagnosis of conditions such as sepsis, TB, COVID and other infections and then applying robotics and AI to advance infectious disease testing.

Both serve attractive and complementary end markets to Waters where there is significant headroom for growth. And importantly, our business model is a natural fit with Waters, combining instruments, consumables, informatics and service. The businesses are anchored by a vast installed base of products in both flow cytometry within our Biosciences business and microbiology together with fast-growing molecular diagnostics within our diagnostic solutions.

For as long as I can remember, there's never been a time when both biosciences & diagnostic solutions had such an exceptionally strong innovation pipelines. In biosciences, we're transforming flow cytometry with continued series of innovations, including our new FACSDiscovery instruments, new antibodies, dies and assays, along with scaling our single-cell multiomics platform.

In fiscal year 2024, Biosciences generated $1.5 billion in revenue, addressing a $7 billion market growing high single digits. Key growth drivers include advanced QC workflows for therapeutics and increasing demand for single cell resolution to understand complex disease biology.

On the Diagnostic Solutions side, the business is expanding its omics menu for medium throughput laboratories through BD MAX, is expanding into the high throughput molecular space with BD core. Our Onclarity HPV assay is set to transform cervical cancer screening globally by enabling at-home self-collection.

And in Microbiology, we're excited about the upcoming launch of our next-generation BACTEC system. In fiscal year 2024, Diagnostic Solutions delivered $1.8 billion in revenue, addressing a $15 billion market growing mid-single digits plus, driven by rising infectious disease testing, antimicrobial resistance surveillance and greater lab automation to improve throughput and efficiency.

Overall, this business is well positioned to create value under any separation structure with focused investments in capital deployment dedicated to the life science industry.

Biosciences & Diagnostic Solutions operate with a strong portfolio and pipeline in market segments growing mid- to high single digits. In fiscal 2024, together, these businesses generated approximately $3.4 billion in revenue with over 80% recurring revenue and an approximately 26% adjusted EBITDA margin. including around $100 million of estimated allocated corporate costs necessary to support the business.

The portfolio is diversified across end markets and geographies, but all are tied to resilient regulated categories requiring differentiated capabilities. With Waters' operational focus, execution playbook, deep life sciences expertise, highly complementary portfolio and strong commitment to innovation, we see a step change opportunity ahead to unlock the full potential of biosciences and diagnostics. We are confident that Waters under Udit's leadership, represents the best path to create substantial value for shareholders while ensuring our employees continue their legacy of delivering innovative, meaningful solutions for global health care.

With that, I will turn the call back to Udit to talk about Waters' strong foundation and the promising path that lies ahead for the combined company.

Thank you. Thank you, Tom, for your remarks and for what has been a thorough and collaborative process. At Waters, we too have built a highly repeatable business model centered around downstream regulated applications where high throughput, compliance and reliability are critical.

This business model enables us to simplify complex instruments without losing sophistication. It is underpinned by compliant enterprise software that assures data integrity, industry-leading chemistry capabilities and an award-winning dedicated service business.

Our model centers on four integrated pillars: instruments, informatics, consumables and service, which together have created a durable ecosystem. Our business is a razor/razor-blade model. However, the razor is actually Empower, our compliant informatics platform, which serves as the interface between manufacturing QA/QC labs and regulators.

Approximately 80% of novel drugs submitted to the FDA, EMA and the China NMPA are done so using Empower. We have a broad installed base of instrument systems across liquid chromatography, mass spectrometry, light scattering and others, which themselves are razor blades as they're replaced every 5 to 7 years. Then, of course, we have service and chemistry, which we categorize as annually recurring revenue.

What sets Waters apart is our deep customer loyalty, driven by decades of breakthrough innovation, exceptional service coverage and consistent reinvestment in R&D at around 10% of product revenue. Our expertise in downstream high-volume applications enables us to capture growth across an exciting mix of fast-growing testing opportunities in manufacturing settings, such as biologics, GLP-1s and generic off-patent therapeutics.

For many of you, who've followed Waters in recent times, this dashboard will look familiar. Over the past 5 years, we've executed a focused and disciplined transformation built around enterprise-wide growth initiatives. We embedded instrument replacement programs into our commercial cadence, grew service plan attachment to over half of our installed base, expanded e-commerce and elevated operational execution. These actions helped drive consistent commercial momentum.

At the same time, we revitalized our innovation engine, launching major products like the Alliance iS, Xevo TQ Absolute and MaxPeak Premier Columns, each of which has solved critical unmet needs and achieved vertical commercial success. And we expanded into high-growth adjacencies like bioseparations, bioanalytical testing and specialty clinical diagnostics, both organically and through M&A including our acquisition of Wyatt Technology.

The transformation at Waters was deliberate, successful and built on a model that is now fully embedded in how we operate. Waters enters this transaction from a position of strength. In 2024, our total revenue was around $3 billion with EBITDA of $1.1 billion and an industry-leading adjusted operating margin of 31%.

We serve essential roles in pharma with approximately 85% of our segment revenue tied to development and manufacturing QA/QC. We have a balanced global footprint and a robust installed base of over 170,000 systems that continues to drive recurring revenue and service growth. Importantly, Waters' stand-alone organic growth, adjusted EBITDA margin and free cash flow as a percentage of revenue have all been well above the peer group average, highlighting the strength and durability of our financial model.

Next, I want to highlight the powerful strategic fit of this deal and how it fast tracks our ambitions into multiple high-growth adjacencies, all simultaneously. First, the combination allows us to meaningfully accelerate innovation in our bioseparations high-growth adjacency. Waters is an innovation leader in chemistry separations and has launched a number of very successful large molecule chromatography columns, such as MaxPeak Premier, which have grown mid-double digits for several years now.

By pairing together the deep chemistry expertise at Waters and the deep biology expertise at BD, we will be able to create next-generation consumables that would support the next wave of high-volume pharmaceutical growth in biologics and novel modality areas.

Next, bioanalytical characterization. Waters is uniquely positioned to bring flow cytometry downstream into large molecule QA/QC given our Empower platform and our established presence in these labs. This is the perfect time to do so as flow cytometry instruments are already seeing adoption in large molecule QA/QC within cell therapy, particularly in quality control and release testing of cell-based products.

By adding flow cytometry into our large molecule characterization suite, we extend our capabilities beyond molecular composition, which are currently served by mass spec and light scattering into structural and functional analysis of receptor interaction and biological response. This allows us to measure the impact of therapeutic agents based on precise characterization of live cells.

We have long been looking for a partner that brings deep biologics expertise, including a strong portfolio of reagents. BD brings exactly that, enabling us to accelerate our entry into these application areas. It provides us with the capabilities needed to significantly shape and increasingly participate in the exciting growth area of downstream large molecule testing.

This combination also meaningfully advances our long-term ambition to bring LC-MS further into Multiplex diagnostics. This is an area where we believe there is a significant unmet need and value creation opportunity as more proteins are becoming relevant for early disease detection or minimal residual disease monitoring. In these workflows, there is often cross-reactivity between biomarkers, which is an area -- which is where other systems fall short.

Waters brings world-class expertise in liquid chromatography, mass spec and validated analytical methods, but we lack regulatory and market access capabilities, global commercial reach in core and specialty labs as well as reagents and automated sample draft. With this combination, BD brings the diagnostics infrastructure we're missing and has a trusted presence among customers that we will ultimately scale towards with this technology.

Now that I have covered the strategic and operational logic behind this transaction. I will now turn it over to Amol to cover the financial benefits. Amol?

Thank you, Udit, and good morning, everyone. I'm excited to walk you through the financial benefits of this compelling strategic combination. It has sound industrial logic and offers an industry-leading financial outlook. We expect to create significant shareholder value through both cost and revenue synergies.

We expect approximately $200 million of annualized cost synergies by year 3 post closing, which largely stem from optimizing our manufacturing and supply chain, from procurement and from other efficiencies across SG&A. These synergies are net of both increased scale and conclude targeted investments in commercial and R&D.

We are also very confident that we can deliver approximately $290 million of annualized revenue synergies by year 5 post closing as we deploy our proven execution model to instrument replacement, e-commerce and service and pursue the high-growth adjacencies, as Udit outlined.

We will also unlock several unique cross-selling opportunities by leveraging the complementary strengths of two trusted, market-leading portfolios. Together, this translates to approximately $345 million of annualized EBITDA contribution expected by year 5. The combined business has a high-quality financial profile and significant long-term upside.

The 5-year growth and profitability projections set us apart from our peers and will place us at the top of the industry. The combined company is positioned to deliver a compelling compounded growth profile over the next 5 years that investors can believe in.

This includes mid- to high single-digit expected revenue CAGR growth, approximately 500 basis points of expected adjusted operating margin expansion and mid-teens expected adjusted EPS CAGR growth. This is all while maintaining our commitment to investing 10% of product sales into R&D.

By 2030, we expect to reach $9 billion in revenue and $3.3 billion in adjusted EBITDA with an industry-leading 32% adjusted operating margin percentage. This is a business that pairs world-class innovation with world-class financial performance, creating significant and durable value for shareholders.

As we've said in the past, our focused approach and strong free cash flow profile positions us well to execute on this opportunity. We also expect to reduce net leverage to below 2x within 18 months.

The combination structure has Reverse Morris Trust in which BD will spin off its Biosciences & Diagnostic Solutions business and simultaneously merge it with Waters in a tax-efficient transaction valued at approximately $17.5 billion.

On a pro forma basis, Waters' shareholders will own approximately 60.8% of the combined company, and BD's shareholders will own approximately 39.2%. Waters is expected to assume approximately $4 billion of net debt as BD will receive an approximately $4 billion of cash distribution prior to closing, subject to adjustments.

In summary, our strong financial foundation will be enhanced further and will enable significant value creation for the combined company's shareholders. I will now turn it back to Udit to share some further details and closing remarks.

Thank you, Amol. The name of the combined company will remain Waters and will be listed on the New York Stock Exchange under the ticker WAT. Amol and I will lead the combined management team. We will retain our corporate headquarters in Milford, Massachusetts while maintaining a strong presence in key BD Bioscience & Diagnostic Solution sites.

The transaction is expected to close around the end of the first quarter of calendar year 2026, subject to receipt of required regulatory approvals, Waters' shareholder approval and satisfaction of other customary closing conditions.

In summary, this is a combination of two pioneering businesses uniquely suited for each other. Waters and BD Biosciences & Diagnostic Solutions share a rich legacy of innovation, complementary expertise in regulated high-volume settings and a deep commitment to science and solving customers' unmet needs. Together, this combination will create a company with broader capabilities, best-in-class technologies, industry-leading financials and a clear runway for sustainable long-term growth.

This transaction is not just additive, it is transformational. It creates a life science and diagnostic leader with a strong foundation and a clear focus built to shape the future of regulated science and deliver meaningful value to shareholders, customers and employees alike. We continue to execute at a high level at Waters, and we are seeing further strong momentum in our business.

We look forward to going through our second quarter financial results with you all at our upcoming earnings call on August 4. With that, I will turn the call back to Caspar.

Thank you, Udit. Leila, we are now ready to open the line for questions.

[Operator Instructions] Our first question will come from Jack Meehan with Nephron.

Udit and team, this is a big transformative move for you at Waters. I wanted to start with the revenue synergy opportunity. Can you talk about any customer dialogue you've had around the flow cytometry cross-selling the QA/QC or LC into diagnostics?

And I'll squeeze in my second question here as well, which is I know we'll have earnings soon, but investors are very curious, need to ask any color on the momentum you're seeing in the base business through 2Q.

Sure. So Jack, firstly, thank you. Let me start with the strategic rationale and how the revenue synergies fit in. I mean this is absolutely a perfect fit. I mean you've seen us talk about our operational rhythm over the last 5 years with instrument replacement, with service attachment increase, with e-commerce adoption.

Here comes BD with 70,000 more instruments that are planted in every laboratory around the globe. 20.000 are up due for replacement in the next 2 years. We're chomping at the bit to get going. E-commerce at 20% penetration, and we've reversed the journey to 40% already at Waters over the last 5 years. We intend to do the same over a much larger consumables portfolio at BD.

And service attachment at BD Biosciences & Diagnostic Solutions starts at 40%, which is where we were 5 years ago as well. And you can see how far we've come over the last 5 years there as well. So we get to apply these operational levers on day 1. So really excited about that. And that gets us immediate revenue momentum.

Second, on the strategic side, we've been very explicit about the adjacencies, right? We have said, look, we want to do to biologics and large molecule QA/QC what we have done in the small molecule space. And for that, we need additional reagents capabilities so we can continue to advance separation science for biologics.

I mean you're familiar with what we've done with MaxPeak Premier which grows almost 40%, 50% in year 3 to 4 of its launch. Now with a large portion of reagents that we've been looking for, for a while that come from BD, we're able to advance that agenda rapidly. So bioseparations advances immediately.

Second, in bioanalytical characterization you asked a question around flow cytometry. You will be familiar from our Investor Day presentations that we listed a variety of different instruments that we wanted to have in the biologics characterization suite and flow was one of them. And here comes the leader in flow cytometry who invented it and has won Nobel Prizes with it, right? So we could not be more excited.

And it's already used now in QA/QC and in early disease detection, right? So marry that with Empower and it's going to be present in every QC lab just like we've done with light scattering. And yes, customers have shown us their flow cytometry instruments. I've seen it personally in a variety of QC labs.

And then finally, taking LC-MS into diagnostics. Again, at Investor Day, one of the most positive feedbacks that we got was how our investors and analysts were positively surprised how far we had come in taking LC-MS into specialty diagnostics. And we were very open that we still needed capabilities on the regulatory side, on sample prep, on automation. And here, we're consummating a combination with a leader in that space, which should overnight accelerate the growth into that area.

Amol will add a couple of facts before we move on to your second question.

Yes. No. I mean, look, all these adds up really well, and Udit covered it really, really well here.

Super. And on your question on earnings, look, the momentum on the business remains really strong. Today is about the deal. So let's focus on that today, Three weeks from now, I promise we will give you all the details that you want on the earnings. I can just say the momentum remains strong.

Sounds good. If I can squeeze in one more. I think something that people historically have loved about the Waters' thesis is that you have these market-leading businesses and obviously, the bioscience and microbiology businesses effect and bring that as well. But there's some portion that are market-leading businesses, I think molecular and point-of-care players, but more competitive. Can you talk about the strategic fit of those businesses? And what you think about those for the long term?

Yes. I mean, look, what people love about Waters is the quality of the asset Waters is. And this business that we are inheriting is exactly that, right? BD pioneered flow. It has supported Nobel Prize-winning research.

The molecular diagnostic -- the microbiology piece of BD is also very unique, very well moted, it does really well. And so if you look at it from that vantage point, almost 80% of this company is iconic brands that are trusted by customers and have an outstanding reputation in the marketplace.

Now within the diagnostic piece when you get into the molecular part or the point-of-care part, again, there, you look at how BD has launched really nice innovation in the market that's doing resoundingly well in the market. like BD MAX and BD Core. And that's also very critical to our thesis because that really helps LC-MS in diagnostic find channels, it finds regulatory and market access expertise that accelerates assay menu production. It also helps us get into automation of LC-MS. So that's a huge value creator for our significant adjacency.

Jack, this is Tom Polen as well. Just to add on, particularly on the molecular side, Obviously, as Amol described, a world leader and a pioneer in microbiology and in molecular really have been a pioneer in syndromic testing in the mid-throughput segment of the marketplace.

As you know, BD MAX continues to grow strong mid-teens growth rate. It's been at that growth rate for many years, and it continues at that growth rate today. And BD Core is quite a new platform to marketplace entering into an entirely new growth segment for BD that we haven't been in the past with a highly differentiated assay or cervical cancer screening.

And the first company to really pioneer the application of women's self-sampling for annual cervical cancer screening by themselves at home, which we think is a game changer in that space, and we're extremely well positioned to be the leader in, in transforming how care is delivered there. So I think we're really excited about the future of our -- of the molecular platform. And again, that's going to do phenomenally in Waters' hands.

Our next question will come from Rachel Vatnsdal with JPMorgan.

First off, I just wanted to dig into the cadence of the synergies that you highlighted today. So you walked us through the $200 million of cost synergies by year 3 and $290 million of revenue synergies by year 5. So how should we think about the cadence of that? Is it going to be more front half loaded for either of those and walk us through the assumptions there?

Yes. I mean, look, these synergies will gradually appear through the P&L costs roughly in 3 years and revenue roughly in 5 years. And these synergies are super crisp, right, like we've very cleanly identified areas where there are manufacturing or supply chain overlaps.

Our abilities to consolidate volumes from a direct procurement point of view, places where on the commercial side, we can really leverage our presence in both the businesses and the technology in both the businesses and really leverage our positioning together with BD's in how we service this business.

Also keep in mind, we get now much more denser on our service organization that allows us to make premier offerings such as 24 hours turnaround time, et cetera. On the revenue synergy side, we've sort of adequately discussed, right? On one hand, we are able to apply all our commercial initiatives like instrument replacement, e-commerce and service attached.

The three adjacencies are really fantastic and it's a very unique, unparalleled match here where BD brings all the three missing skill sets that we were searching in the market for and meaningfully accelerates these adjacencies. And the cross-selling opportunities are very real and very crisp.

So we should be able to deliver these revenue synergies over the course of 5 years.

And I think the question also was annually. So cost is 1/3, 1/3, 1/3 for the 3 years, right, roughly around that. So I hope that helps you get more clarity, Rachel.

Yes, that's helpful. Then just as my follow-up here, I wanted to dig in R&D. So you highlighted the 10% of revenue spend on R&D there. Can you just walk us through how are you thinking about the innovation pipeline for the combined company? Where are you seeing some of that spend? Should we see some of the R&D more focused on the diagnostics side and some of the progress there or more on flow cytometry for BD specifically moving forward?

Rachel, it's too early to tell exactly how the portfolio allocation will occur. But all I can tell you is, I mean, I'm -- I mean, you know me now for several years, I'm excited about just what toys are coming into the shop.

Let me start with the bioseparations area. We spend -- in the chemistry business, we spend 70% of our R&D on biologics. That will continue. And now we have access to a world-leading provider of reagents. I can tell you our chemistry team is super, super excited. I mean you should look for good news coming out immediately from there.

Second, on the diagnostics side, I mean you heard my colleague, Jan Ting Bennett talk about this at the Investor Day. We are in search for regulatory capabilities so that our assays get into customers' hands as fast as possible with LC-MS. We wanted to get more market access into high-throughput labs. And here we go, we have global reach here, right?

So I'm super excited about what we're going to be able to do there. And then finally, on bioanalytical, this is flow cytometry. I mean, BD is by far the leader in that area. We get to combine our understanding of informatics, compliant informatics, Empower. I mean, look at what we've just finished doing with multi-angle light scattering. We took it into QA/QC in record time probably 6 months before what we had actually promised our customers. And we intend to do exactly the same here and we start even further with flow cytometry in QA/QC.

It's actually used to release cell therapies today, right? So I'm super excited. Now don't ask me exactly where we will put what pennies. We will just -- simply we're spending a ton on R&D. And you know our discipline. I think when we met last time, we talked a bit about the unmet need and the proof of concept. We have an Innovation Board.

We intend to welcome the vast group of R&D colleagues at BD Life Sciences, BD Biosciences and Diagnostics into our Innovation Board where we will look at unmet needs carefully. We will have an exacting view of the proof of concept, so they'll go through exactly the same process, but I'm super excited about what's coming.

I mean, it's going to be a little bit fluid, right? I mean look, 5 years ago, when we took over the Waters business, it was very similar, coming in as mid-single-digit plus. And over the course of time, we created a very unique idiosyncratic growth drivers like GLP-1, like PFAS, like India Generics. And this is going to be the same.

There is so much opportunity here to create these unique idiosyncratic growth drivers over the course of next 5 years here.

Our next question will come from Tycho Peterson with Jefferies.

I wonder if you could maybe look at this from a customer perspective as we think about cross-selling and some of these adjacencies, How many labs have flown PCR but not LC-MS? Like how do you think about it from kind of a customer opportunity set?

Yes. I mean, the cross-selling opportunity is also pretty immense. Tycho, in fact, when Tom and I first spoke and we spoke to the teams there, that was the most exciting opportunity, meaning they really -- I mean think Wyatt when we -- with Wyatt also, it was the same thing. I mean, a tool that is used in late-stage development and customers almost begging to take it into QA/QC, right?

We have some of the largest customers saying, hey, please attach it to Empower. And it's exactly the same here. And exactly the same here with a much larger business, right? So flow cytometry belongs in QA/QC for cell therapy, for lipid nanoparticles and larger particles, and it will get there with the help of Empower. And you can go to any large pharma lab and if you visit it and you'll find flow cytometry in the development lab but not necessarily in QA/QC. And we intend to get it there.

So just take the total portfolio of labs that we have, it belongs in each and every biologics characterization lab, right? So it's like multi-angle light scrapping, and we can do the dimensionalization offline as well with you.

On bioseparations, it's something similar, right? I mean we launched MaxPeak Premier almost 3 years ago now. It basically reduced the affinity of large molecules to surfaces and customers have still been adopting it 3 years post launch. and it's been growing 40% to 50%. And now we have access to a much larger portfolio of antibodies.

And we've been out in the market looking for reagents players to sort of take highly unique antibodies and conjugate them or attach them to our particles in these columns. And now we have access to it. And again, when the teams met in the diligence time frame, I mean, the two teams, we could not stop them from talking to each other. So we're really looking for the deal to close and get going in the earnest.

And on the other side of the equation, look at it this way, right, we have traction of the access BD has to the specialty labs and core labs in the world. That's going to open so much more doors for LC-MS in diagnostics. BD has such a dense diagnostic service network that we're going to be able to offer 24-hour premier service, which is a meaningful value accretion.

BD has so much capability in developing menus and biomarkers that's going to massively accelerate how quickly we bring biomarkers and assays on LC-MS in diagnostics and the automation capabilities is also going to fast track how we automate and simplify LC-MS in diagnostics.

And with that, Amol is not moving into R&D. I just want to be clear.

Great. And then a follow-up, just I want to stress test the assumptions around these commercial excellence synergies. I mean I get service e-commerce, but what is it that you can do that BD was not already doing on those fronts?

Look, I mean, over the last 5 years, what started off as back of the envelope exercise has morphed into a highly systematic process and system KPI-driven instrument replacement, how we do it in our CRM system, how automatically when an instrument becomes due for replacement, becomes an opportunity in the CRM, gets meticulously tracked.

And that discipline by itself is very accretive, right? And we've mastered that act over the last 5 years, and you see that in our numbers. and in our relative performance versus our peer group. We feel highly confident about this act, and that act is going to now be redeployed on this entire installed base, both on the flow side as well as on the diagnostic side.

Yes. And I think just to sort of embellish on that, Tycho, look, when we came into the business, I remember telling you this anecdote before as well, I mean, we had an installed base, but we did not know exactly when things were going to get replaced, and we did not know when to go to the customers. And we had sort of lost -- we had built a replacement debt. And we quickly caught up with that by first sort of putting all the instrument -- the installed base into a CRM system.

We intend to do that -- do the same here -- exactly the same here. And second, we came up with a new platform and said, hey, dear customer, instrument's about to be replaced. Here is a new platform, Alliance iS, and that gives the customer a trigger to replace.

It's playing out exactly the same. BD has 75,000 instruments installed, 20,000 are up for replacement in the next 2 years, 20,000. They have two new platforms, one on the microbiology side that is going through clinical trials that will be launched in 2026, think Alliance iS.

And on the molecular side already, and on the flow side, sorry, already, there is the FACSDiscover S8, right, that has been launched recently. So both of these new platforms, along with an installed base that could now -- that will now get married with the cadence that we've developed, and you met some of our colleagues when we had the Investor Day when Rob Carpio, we hired with an expressed intent to systematize our KPIs even more. And Rob has the background that he does, and you sort of have met him and you can sort of imagine how that will get deployed in this business.

No, we are super thankful to BD because they're gifting us a business with amazing innovation that's going to drive this replacement cycle on every angle, right? It's like a deja vu of EQ Absolute, Alliance iS and Arcage plc.

And Tycho, this is Tom with BD. I'd say as we got to know, obviously, Udit, Amol and the team and the playbook that they've executed over the last several years, and we understood how that playbook had panned out to really produce obviously exceptional growth and performance that Waters has over the last several years, we became convinced ourselves that, that playbook was highly applicable to these businesses and creating the value that's been described very well here by Udit and Amol.

Whether or not that's the -- again, we, as a large company with med tech and life sciences, the opportunity to have focused life science company here and apply that playbook to the service sector, particularly in the Biosciences business. We don't have a channel that's focused on the pharma QA/QC lab. We know we're getting a lot more interest.

Again, most cell therapies use our technology for release increasingly, but there's a whole set of unmet needs that still exist in that sector that Waters understands inherently genetically in their DNA that is going to be a big positive to really capitalizing on that opportunity. And those types of opportunities, they continue through in multiple different areas.

Again, as a pure-play life science focused company with a proven playbook and track record that we see as variable -- very, very applicable to the business, the two businesses that are combining here today.

Let's make one or two other sort of embellishments on e-commerce and service attach since you asked about the three. On service attachment, we again started with about 40% back 5 years ago. It's exactly the same scenario, a leading, highly reputed service organization where attachment rate is around 40%, and we deploy tactics like, a, ensuring that each time you're selling something, you're quoting the instrument service revenue.

The same thing with renewals. I mean so the tactics are very well proven and across the globe, and we intend to deploy them on day 1. And on e-commerce, just to sort of give you a benchmark, antibody -- companies that have antibody portfolios usually have e-commerce penetration between 50% and 75% -- 50% to 75%. And so there is a nice headroom here and you'll remember from the Sigma days, it was exactly like that.

So I mean, we're -- we know that this can work, and there are two technology stacks, and we have to assess which one we want to back more. and we will put everything on that on the distribution centers are global. So I don't want to get into more tactics but you can be sure that we've looked at that very carefully.

Our next question will come from Puneet Souda with Leerink.

And congrats on this transformative acquisition here and the deal. An important question for you. You led the transformation at Waters 5 years ago when you joined. And an important part of that has been the discipline and the KPIs that Amol had talked about and that you implemented across the org and the commercial org as well.

Could you maybe take a minute and help us understand where you see the most significant opportunities on the BD side that you can immediately deploy in terms of overall execution that helps you drive these synergies and the -- you have an aggressive margin improvement profile that you're expecting here. Maybe just help us understand how do you plan to execute on that disciplined execution and KPIs needed for BD that might not be there today and where the opportunities are, despite that sort of the tough macro backdrop we're in.

So Puneet, thank you for your question. First, it's the team that does the work, and I'm fortunate enough to talk about it. And when we take a step back, look, I mean we're inheriting from BD, a market-leading business that every customer in their segment knows. These are iconic brands. They are sort of -- they have defined the categories, be it flow, be it microbiology testing, I mean these are brands that have defined the category.

So nobody needs reminders of what these brands are. Now to sort of deploy the same sort of playbook, I mean, the first thing is transparency. Where are these instruments? Where are they placed? We know that -- our BD colleagues know where they're placed, getting them into a CRM system like Amol said, and then basically, in a very disciplined way, going customer by customer and saying, "Hey, how old is the instrument? Does it require replacement?" I mean we've done that and I'm making -- I'm sort of oversimplifying it. There are several other steps.

And of course, new products, they have a huge role in triggering that conversation and triggering that transition. And we're inheriting a business that has both those factors, meaning a transparency on the installed base; and second, a set of new products that are going to trigger this conversation, right? So this is fantastic.

And again, like our Waters business, customers are very loyal. They don't switch from one vendor to the other, especially when you're doing a great job in this sector as well. They are regulated segments with 80% -- over 80% of recurring revenues. And so I think the characteristics are quite similar to what we inherited and the KPIs would be rather the same.

And on e-commerce, for instance, I mean, we look at the number of customers coming on e-commerce, when I could go into all of the KPIs, but you really look at the number of customers coming in, what the affinity is, what the fallout rate is. And then you sort of apply that model again and again and again and step by step, you start to reach the -- I mean, where we are today is 40% penetration. The ambition is even higher. We will take it for a larger business from 20% to over 50% in penetration for e-commerce.

And I mean, to answer your other question on margin expansion. I mean, look, the assumptions are very prudent. The underlying business that we are inheriting, we are only making modest assumptions of 30 to 40 basis points of margin expansion each year.

Where the margin expansion really comes from is the cost and the revenue synergies, which, as we outlined, are very real and prudently estimated and have a high degree of confidence that we'll achieve the cost synergies in 3 years and the revenue synergies in 5 years. So we feel really comfortable and confident that we can get to 32% margin by year 5.

Amol, following upon that margin question, if I may. At the Investor Day, you had laid out a 35% op margin target for 2030. Now it's 32%. Obviously, the mix is going to change here with pro forma. Can you maybe just help us understand, is there conservatism there? Is that -- where is the room for upside? Because now you're projecting a 40 bps margin expansion annually versus sort of 60 to 70 bps that you had before. Obviously, this has implications for the valuation expectations for Waters that were established at the Investor Day.

Yes. Look, I mean, the underlying Waters margin profile that we communicated on the Investor Day, really doesn't change. The assumptions we are making on the BD's stand-alone business are pretty prudent and gives us a meaningful upside potential if we are able to execute all the programs that we are inheriting from BD on margin expansion well, right? So we've risk adjusted those programs.

If those programs really work well there should be a meaningful upside to the stand-alone margin. And as we discuss on cost and revenue synergies, there is upside to those numbers, and that would further accrete the margin. What's most typical is when you look at EPS, EPS is already accretive in the first year. And with what we are outlining produces mid-teens EPS growth. So financially, it is pretty robust.

And then you take one step back and look how compelling the combination is, right? Not one, not two, but all the three life science adjacencies that we have get accelerated. It produces an amazing 70% recurring -- annually recurring business that brings growth stability on the back of a business that has more than 80% of revenue coming from market trusted iconic brands.

We feel really great about this because that's going to create long-term meaningful value for shareholders.

Our next question will come from Brandon Couillard with Wells Fargo.

I think the consensus is kind of modeling somewhere around 3% to 4% organic growth from the BD assets the next couple of years. How do you get comfortable that this business is kind of a mid-single-digit plus grower? Did you consider just acquiring the flow asset as opposed to the combined entity? You talk about kind of the appeal of two different sides.

Yes. Let me first start, and I'll let Tom comment on the transaction that was on offer. Look, I mean, historically, the BD Bioscience & Diagnostics business has grown mid-single digit plus, right? And you rightly commented, there are two portions to it. The flow business which historically has been a high single-digit grower through thick and thin. And the Diagnostics business and in the Diagnostics business itself, 65% is microbiology, where BD defines the category globally, right? And that grows mid-single digits -- has been growing mid-single digits long-term.

In the next few years, and in fact, just last year, BD launched first, in the flow area, the FACSDiscover S8, which is a new platform, it basically is going to -- it's setting a new standard in the industry and the presales have been tremendous from what we learned from the team. And on the microbiology side, the team is launching a new platform next year where the clinical studies are going extremely well.

So both of these businesses have historically grown mid-single digit plus, are coming up -- have had new launches or are coming up with new launches very, very soon that should trigger even further growth.

Now if you look at the current sort of trends, as with every other sort of business, they've experienced one or two challenges in the current time frame. First, the A&E and the drug discovery market has been slow, and we've modeled a sort of a slow recovery on that front. They had supply issues on the BACTEC business that have been resolved. That started middle of last year that is now in the baseline and has been resolved and is nicely coming up through the penetration, and we expect upside from that.

And the third is the slowdown in the China business. And not unlike everybody else, BD also experienced some challenges there with importation of their high-end flow business that has also been resolved. So you took -- you take all of those three things, they go into the baseline, you start with a lower base and you start to grow from that base and you are very quickly in the mid-single digit, mid-single-digit plus range. And for the pro forma business, we think by the end of 2026, we will already be in the mid-single digit plus range for the full year.

This is Tom. Just to add on, I thought Udit described it exceptionally well. I would describe it as you think about Biosciences has always grown high single digits, as Udit described, and the diagnostics business has always grown mid-single digits. There's those three areas in the kind of the huge short term over the last 12 months with academic government spending. I would describe as the biosciences business is spring loaded to recover as that markets come back. It's reset at a lower base and the innovations that we're launching are truly changing the category.

We just launched the FACSDiscover A8, which is off to an exceptionally strong start. We're ahead of our initial plans by a good margin in terms of the number of instruments purchased there right off the bat. BACTEC, again, there was a supplier issue last year, that is fully back with full optimized supply. And the run rate of that has been moving up basically 10 points a quarter back towards its historical level and very much on track.

That's going to have obviously a relatively simple comp as that continues to grow over -- as we head into next year. And then China, if you think about China for the flow business, there had been an import ban on certain flow cytometers into Europe that -- or into China that has been basically mitigated with exceptions and is poised to just have that permanently eliminated, which is in active review and then processed through the federal government.

But in the meantime also, we've actually localized the #1 selling BD flow cytometer in China. We Just went live on making that now in China, which does two parts. One is it gets around the import ban. Second is it actually gets around tariffs completely as well because we're importing that product from the U.S. to China that's now being made in China local as the FACSLyric which is by far and away the #1 selling BD flow cytometer there. So there's a number of different factors that really position that business -- both businesses well to return to that long-term strong growth profile.

Thank you, Tom. Look, we are reaching the top of the hour. I want to conclude firstly by thanking you all for jumping on to the call so quickly. I want to reiterate that this is a fantastic strategic fit. I mean, we get access to a larger total accessible market of $40 billion that grows 5% to 7% over the mid- to long term. It's a fantastic strategic fit. It allows us as Waters to apply our operational levers on day 1.

And all at once gives us access to the three strategic faster-growing adjacencies that we've been talking about for the last several years. It increases growth stability. Going forward, our recurring revenues will be over 70%, and these are in areas which are dependent on nondiscretionary spending. So really fantastic there as well.

And finally, the industry leading -- it will be an industry-leading financial outlook, right, with significant cost and revenue synergies, the deal is accretive -- EPS accretive in year 1 and has a mid-teens EPS growth every single year for the next 5 years.

So thank you again. for joining us, and we'll talk to you in the coming days.

This now concludes the call. Thank you for joining us, and have a good day. You may disconnect at this time.