Waters : Q1 2024 Non-GAAP

Waters Corporation and Subsidiaries

Reconciliation of GAAP to Adjusted Non-GAAP

Net Sales by Operating Segments, Products & Services, Geography and Markets

Three Months Ended March 30, 2024 and April 1, 2023

(In thousands)

											Organic
											Constant
		Three Months Ended	Percent	Impact of		Impact of		Currency
		March 30, 2024			April 1, 2023	Change	Currency		Acquisitions		Growth Rate (a)
NET SALES - OPERATING SEGMENTS
Waters	$	561,899	$	602,075	(7%)	(1%)	4%	(10%)
TA		74,940			82,599	(9%)	(1%)	0%	(9%)
Total	$	636,839	$	684,674	(7%)	(1%)	3%	(9%)
NET SALES - PRODUCTS & SERVICES
Instruments	$	241,944	$	302,942	(20%)	0%	5%	(25%)
Service		260,688			248,217	5%	(1%)	2%	4%
Chemistry		134,207			133,515	1%	(1%)	0%	2%
Total Recurring		394,895			381,732	3%	(1%)	2%	3%
Total	$	636,839	$	684,674	(7%)	(1%)	3%	(9%)
NET SALES - GEOGRAPHY
Asia	$	207,559	$	253,081	(18%)	(3%)	1%	(16%)
Americas		241,171			246,421	(2%)	0%	6%	(8%)
Europe		188,109			185,172	2%	2%	2%	(3%)
Total	$	636,839	$	684,674	(7%)	(1%)	3%	(9%)
NET SALES - MARKETS
Pharmaceutical	$	374,207	$	384,898	(3%)	(1%)	4%	(6%)
Industrial		195,334			209,650	(7%)	(1%)	1%	(7%)
Academic & Government		67,298			90,126	(25%)	2%	3%	(30%)
Total	$	636,839	$	684,674	(7%)	(1%)	3%	(9%)

1. The Company believes that referring to comparable organic constant currency growth rates is a useful way to evaluate the underlying performance of Waters Corporation's net sales. Organic constant currency growth, a non-GAAP financial measure, measures the change in net sales between current and prior year periods, excluding the impact of foreign currency exchange rates during the current period and excluding the impact of acquisitions made within twelve months of the acquisition close date. See description of non-GAAP financial measures contained in this release.

Waters Corporation and Subsidiaries

Reconciliation of GAAP to Adjusted Non-GAAP Financials Three Months Ended March 30, 2024 and April 1, 2023 (In thousands, except per share data)

																	Income from
																	Operations
			Selling &			Research &					Operating						before			Provision for						Diluted
			Administrative			Development			Operating		Income			Other			Income			Income			Net			Earnings
Three Months Ended March 30, 2024		Expenses(a)			Expenses			Income		Percentage			Income			Taxes			Taxes			Income			per Share
$	196,612	$	44,595	$	133,846	21.0%	$	2,259	$	114,856	$	12,660	$	102,196	$	1.72
GAAP
Adjustments:
Purchased intangibles amortization (b)		(11,834)			-			11,834	1.9%			-			11,834			2,832			9,002			0.15
Litigation provision (c)		(10,242)			-			10,242	1.6%			-			10,242			2,458			7,784			0.13
Restructuring costs and certain other items (d)		(8,347)			-			8,347	1.3%			-			8,347			2,055			6,292			0.11
Retention bonus obligation (f)		(5,725)			(1,909)			7,634	1.2%			-			7,634			1,832			5,802			0.10
Adjusted Non-GAAP	$	160,464		$	42,686		$	171,903		27.0%		$	2,259		$	152,913		$	21,837		$	131,076		$	2.21
Three Months Ended April 1, 2023
GAAP	$	183,435	$	42,691	$	174,168	25.4%	$	1,388	$	165,173	$	24,250	$	140,923	$	2.38
Adjustments:
Purchased intangibles amortization (b)		(1,479)			-			1,479	0.2%			-			1,479			335			1,144			0.02
Restructuring costs and certain other items (d)		405			-			(405)	(0.1%)			-			(405)			256			(661)			(0.01)
Acquisition related costs (e)		(8,342)			-			8,342	1.2%			-			8,342			2,002			6,340			0.11
Adjusted Non-GAAP	$	174,019		$	42,691		$	183,584		26.8%		$	1,388		$	174,589		$	26,843		$	147,746		$	2.49

1. Selling & administrative expenses include purchased intangibles amortization.
2. The purchased intangibles amortization, a non-cash expense, was excluded to be consistent with how management evaluates the performance of its core business against historical operating results and the operating results of competitors over periods of time.
3. Litigation provisions and settlement gains were excluded as these items are isolated, unpredictable and not expected to recur regularly.
4. Restructuring costs and certain other items were excluded as the Company believes that the cost to consolidate operations, reduce overhead, and certain other income or expense items are not normal and do not represent future ongoing business expenses of a specific function or geographic location of the Company.
5. Acquisition related costs include all incremental expenses incurred, such as advisory, legal, accounting, tax, valuation, and other professional fees. The Company believes that these costs are not normal and do not represent future ongoing business expenses.
6. In connection with the Wyatt acquisition, the Company started to recognize a two-year retention bonus obligation that is contingent upon the employee's providing future service and continued employment with Waters. The Company believes that these costs are not normal and do not represent future ongoing business expenses.

Waters Corporation and Subsidiaries

Preliminary Condensed Consolidated Statements of Cash Flows

Three Months Ended March 30, 2024 and April 1, 2023

(In thousands and unaudited)

		Three Months Ended
		March 30, 2024			April 1, 2023
Cash flows from operating activities:
Net income	$	102,196	$	140,923
Adjustments to reconcile net income to net
cash provided by operating activities:
Stock-based compensation		10,913			12,805
Depreciation and amortization		48,514			31,154
Change in operating assets and liabilities and other, net		101,247			11,869
Net cash provided by operating activities		262,870			196,751
Cash flows from investing activities:
Additions to property, plant, equipment
and software capitalization		(28,655)			(34,390)
Investments in unaffiliated companies		(1,064)			-
Net change in investments		(25)			(16)
Net cash used in investing activities		(29,744)			(34,406)
Cash flows from financing activities:
Net change in debt		(300,000)			(94,960)
Proceeds from stock plans		13,932			2,378
Purchases of treasury shares		(13,089)			(69,505)
Other cash flow from financing activities, net		6,981			2,876
Net cash used in financing activities		(292,176)			(159,211)
Effect of exchange rate changes on cash and cash equivalents		1,264			2,407
(Decrease) increase in cash and cash equivalents		(57,786)			5,541
Cash and cash equivalents at beginning of period		395,076			480,529
Cash and cash equivalents at end of period	$	337,290	$	486,070

Reconciliation of GAAP Cash Flows from Operating Activities to Free Cash Flow (a)

Net cash provided by operating activities - GAAP	$	262,870	$	196,751
Adjustments:
Additions to property, plant, equipment
and software capitalization		(28,655)			(34,390)
Litigation settlements received, net		(375)			(375)
Major facility renovations		-			4,466
Free Cash Flow - Adjusted Non-GAAP	$	233,840		$	166,452

1. The Company defines free cash flow as net cash flow from operations accounted for under GAAP less capital expenditures and software capitalizations plus or minus any unusual and non recurring items. Free cash flow is not a GAAP measurement and may not be comparable to free cash flow reported by other companies.

Waters Corporation and Subsidiaries

Reconciliation of Projected GAAP to Adjusted Non-GAAP Financial Outlook

	Three Months Ended		Twelve Months Ended
	June 29, 2024		December 31, 2024
Projected Sales		Range				Range
Organic constant currency sales growth rate (a)	(6.0%)	-	(4.0%)	(0.5%)	-	1.5%
Impact of:
Currency translation	(2.0%)	-	(2.0%)	(0.6%)	-	(0.6%)
Acquisitions	1.5%	-	1.5%		1.1%	-	1.1%
Sales growth rate as reported	(6.5%)	-	(4.5%)	0.0%	-	2.0%

Projected Earnings Per Diluted Share			Range						Range
GAAP earnings per diluted share	$	2.28	-	$	2.38	$	10.90	-	$	11.20
Adjustments:
Purchased intangibles amortization	$	0.15	-	$	0.15	$	0.60	-	$	0.60
Retention bonus obligation	$	0.07	-	$	0.07	$	0.25	-	$	0.25
Adjusted non-GAAP earnings per diluted share
$	2.50	-	$	2.60	$	11.75	-	$	12.05

1. Organic constant currency growth rates are a non-GAAP financial measure that measures the change in net sales between current and prior year periods, excluding the impact of foreign currency exchange rates during the current period and excluding the impact of acquisitions made within twelve months of the acquisition close date. These amounts are estimated at the current foreign currency exchange rates and based on the forecasted geographical sales in local currency, as well as an assessment of market conditions as of today, and may differ significantly from actual results.

These forward-looking adjustment estimates do not reflect future gains and charges that are inherently difficult to predict and estimate due to their unknown timing, effect and/or significance.