Waters (WAT) TD Cowen 46th Annual Health Care Conference summary

Integration and business assessment

• Integration of the BD acquisition is ongoing, with leadership visiting global sites and engaging teams to assess operations and customer feedback.

• The acquired businesses are recognized for strong brands, high gross margins (~60%), and engaged R&D teams, but require improved execution and management precision.

• Cross-pollination between legacy and acquired teams is encouraged, especially in pricing strategies and operational best practices.

• A company-wide town hall engaged 12,000 employees, reflecting high organizational energy and focus on execution.

Financial performance and guidance

• BD's Q4 decline was attributed to three non-recurring items (licensing, flu season, China export issues) and one recurring headwind (DRG in China), with underlying business roughly flat after adjustments.

• Guidance for BD in Q1 is a 2–3% decline, improving to flat or low single-digit growth by Q2/Q3, and mid-single-digit growth in Q4, with a conservative haircut to the top line due to China headwinds.

• EPS growth commitments remain intact, with cost base adjustments and operational improvements not yet factored into guidance.

• The bioscience business underperformed the market by 500 basis points, mainly due to execution issues, with recovery expected as management precision improves.

Operational improvements and margin outlook

• Immediate focus areas include improving pricing (targeting >200 basis points vs. current 50), better distribution, and leveraging differentiated reagent portfolios.

• BD's operating margin is guided at 22.4% for the year, with margin progression reflecting cost savings, tariff implementation, and revenue phasing.

• Cost structure adjustments and tariff implementations are expected to add 180 basis points to margins in the second half of the year.

• No major leadership changes are planned; focus is on discipline, accountability, and removing corporate barriers to enable rapid improvement.