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Waters Q3 Revenues Flat, Fall Short of Expectations

NEW YORK – Waters reported on Tuesday that its revenues in the third quarter were flat, as the company posted weak results in the US market.

Waters posted revenues of $577.3 million in Q3 compared to $578.0 million in Q3 2018 and falling short of the average Wall Street estimate of $588.9 million. Waters said that foreign currency translation decreased sales growth by around 1 percent in the quarter.

On a conference call following release of the results, Waters President and CEO Christopher O'Connell cited "unanticipated late-quarter softness in the US," as the major contributor to the lackluster Q3 earnings. US sales were down 4 percent in the quarter, with sales in the Americas down 5 percent.

O'Connell said that a "cautious tone from our US pharmaceutical customers" led to "inconsistent capital purchasing in the second half of the quarter."

Globally, results were mixed, with sales in Asia growing 7 percent during the quarter, and European sales down 4 percent.

O'Connell said that small molecule pharma LC applications appear to be "in a slower growth environment," which has negatively impacted instrument and consumables sales. He noted that the small molecule space accounts for roughly 70 percent of the company's pharma business.

Waters saw 1 percent growth from its pharma segment during the quarter, flat sales from its industrial business, and a 4 percent decline in sales from its academic and government customers.

The company's instrument sales were down 4 percent in the quarter. Recurring revenues were up 4 percent.

O'Connell acknowledged that the company has seen "over an extended period of time, pressure on our mass spec market share," and added that it has invested "heavily" in an effort to reverse that trend.

At the beginning of the year, Waters launched its BioAccord LC-MS system for biopharma analysis, and last quarter it launched two new tandem quadrupole systems, the Xevo TQ-S Micro and Xevo TQ-S Cronos, targeted at users doing routine quantitation. During the third quarter it launched two new high-end mass spec instruments, the cyclic IMS and Synapt XS systems.

O'Connell said that Waters sold "an encouraging number of the cyclic IMS" instruments in Q3.

The Milford, Massachusetts-based company posted a Q3 profit of $138.1 million, or $2.07 per share, compared to a profit of $141.0 million, or $1.83 per share, for Q3 2018. On a non-GAAP basis, Waters had EPS of $2.13, matching analysts' average estimate.

The firm's R&D spending was down 3 percent year over year to $34.3 million from $35.2 million, while SG&A costs were down less than 1 percent to $126.0 million from $127.0 million.

The company ended the quarter with $404.6 million in cash, cash equivalents, and investments.

For Q4 2019, Waters said it expects sales growth in the range of 0 percent to 2 percent and non-GAAP EPS in the range of $2.95 to $3.05.

For full-year 2019, the company said it expects non-GAAP EPS to be in the range of $8.73 to $8.83, below its previous guidance of $8.95 to $9.10.

In Tuesday morning trading on the New York Stock Exchange, shares of Waters were down around 6 percent to $207.47.

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