Good morning and welcome to the Waters Corporation First Quarter 2022 Financial Results Conference Call. All participants will be in a listen-only mode until the question-and-answer session of today’s call. This conference call is being recorded. If anyone has objections, please disconnect at this time. Now, it is my pleasure to turn the call over to Mr. Caspar Tudor, Director of Investor Relations. Please go ahead, sir.

Thank you, operator. Good morning, everyone and welcome to the Waters Corporation first quarter earnings conference call. Before we begin, I will cover the cautionary language. During the course of this conference call, we will make various forward-looking statements regarding future events or future financial performance of the company. In particular, we will provide guidance regarding possible future results of the company and commentary on potential market and business conditions that may impact Waters Corporation over the second quarter of 2022 and full year 2022. We caution you that any and all such statements are only our present expectations and that actual events or results may differ materially from those indicated in the forward-looking statements. For a detailed discussion of some of the risks and contingencies that could cause our actual performance to differ significantly from our present expectations, see the risk factors included in our annual report on Form 10-K for the fiscal year ended December 31, 2021, in Part 1 under the caption Risk Factors and the cautionary language included in this morning's press release, including with respect to risks related to the effects of the COVID-19 pandemic on our business. We further caution you that the company does not intend to update any of its predictions or projections, except during our regularly scheduled quarterly earnings release conference calls and webcasts or as otherwise required by law. During today's call, we will be referring to certain non-GAAP financial measures. Reconciliations of the non-GAAP financial measures to the most directly comparable GAAP measures are attached to our earnings release issued this morning and in the appendix of our presentation which are available on the company's website. In our discussions of the results of operations, we may refer to non-GAAP results which exclude the impact of items such as those outlined in our schedule titled reconciliation of GAAP to adjusted non-GAAP financials included in this morning's press release and in the appendix of our presentation. Unless stated otherwise, references to quarterly results increasing or decreasing are in comparison to the first quarter of fiscal year 2021. In addition, unless stated otherwise, all year-over-year revenue growth rates, including revenue growth ranges given on today's call, are given on a comparable constant currency basis. Now I'd like to turn the call over to Dr. Udit Batra, Water's President and CEO. Udit?

Thank you, Caspar and good morning, everyone. Along with Caspar, joining me on this morning's call is Amol Chaubal, Water's Senior Vice President and Chief Financial Officer. We had a record start to the year with first quarter sales led by instruments which grew over 25% with a broad-based strong performance across all our end markets and geographies. Before summarizing the quarter, let me start by saying how extremely proud I am of our teams who've worked tirelessly to manage our supply chain, delivering operational excellence and exceptional support for our customers through the ongoing challenges of the pandemic. It is a result of the indomitable spirit of all my colleagues at Waters. I will now provide a brief overview of our first quarter operating results and deliver our key messages. Amol will then review our financial results in detail and provide comments on our financial outlook. We will then open up the phone lines to take your questions. Turning now to Slide 3. We have three key messages. First, we had a very good start to 2022 with great traction for our new instrument products, strong operational performance and sustained commercial momentum. Demand has remained robust across all our end markets. Second, we're laser focused on execution, innovation and growth. We continue to make great progress in executing against our enterprise priorities with our core initiatives positively impacting our results. We have a revitalized portfolio with innovation that is answering the needs of our customers in both large and small molecule workflows as well as our non -- as well as in our nonpharma markets such as food testing, environmental and material science. And thirdly, Waters has a firm commitment to leave the world better than we found it. We are delivering sustainable value to our shareholders and stakeholders…

Thank you, Udit and good morning, everyone. As Udit outlined, we recorded net sales of $691 million in the first quarter, an increase of 16% in constant currency and an increase of 13% as reported. Looking more closely at our top line results for the quarter on Slide 9, in constant currency, first by operating segment. Waters Division grew 16%, while TA grew by 18%. By end market, our largest market category, pharma, grew 19%. Industrial grew 17% and academic and government grew 4%. In Pharma, we saw broad-based strength across segments, geographies and applications and in both large molecule and small molecule. Growth was led by the U.S. which was up over 35%. India, up just under 30%; and China which grew mid-teens. In Industrial, our performance was also strong across all major geographies, with U.S., Europe and China all growing 20% or above. Turning to academic and government. We saw a similar trend to last quarter with mid-single-digit growth as customer spending has become more active, led by China and the U.S. Now by geography, sales in Asia were up 14%, with China up 17%. The Americas grew 26% with the U.S. up 28%. And Europe grew 9%. In China, we saw broad performance across all our end markets which grew each up double digits. In the U.S., growth towards broad-based led by Pharma which was up almost 40%; and industrial which grew over 20%. Growth was very strong in both instrument sales which grew almost 60% and recurring revenues which grew in the mid-teens. In Europe, growth was led by Industrial which grew 20% and driven by strong growth in food and environmental. Sales of LC and MS instruments to pharma customers grew high teens as strong capital purchasing patterns continued on from last year. Udit already…

Thank you, Amol. So in summary, our teams continue to deliver excellent results despite the challenging environment with strong instrument growth and great traction for our new instrument products. We are laser focused on execution, innovation and growth. We continue to make progress executing against our enterprise priorities with our core initiatives delivering positively and contributing positively to our results. With that, we will now begin the Q&A session. Operator?

[Operator Instructions] And our first question comes from Vijay Kumar of Evercore ISI.

Congrats on a really strong Q1 share [ph]. Udit, maybe just diving into the performance within the Q. You noted new products in CROs. Maybe -- I guess what the market is trying to debate is there any pull forward of demand? Can you talk about your order books and when you say new products, it feels like this is incremental demand coming in and perhaps not a pull forward of demand. So if you could just talk through the drivers here in Q1 and what the -- how the order book is shaping up, that would be fantastic.

So thank you, Vijay. Really, really proud of what the team has been able to accomplish in the quarter. The simple answer to your question is no. Orders keep outpacing sales and that's happened this quarter as well. So we have a healthy backlog. Now turning to the overall growth and you can just look at the overall market and us in particular. I think some of our peers have reported analytical instrument sales in their segments sometime last week. And they're in the low double digits, so we're a bit higher than that. And that delta is largely attributed to, of course, the operational excellence -- the five [ph] initiatives that I mentioned in the past and really significant traction for our new products. In fact, Arc HPLC and Acuity Premier have had really outsized performance. In fact, the number of units were 3x as what we sold in last -- in the same quarter last year. And we continue to see very good traction for our MAX premier columns, really especially designed for large molecules and biologics where, as you know, the tailwind is very good for biologics. So overall, no pull forward of demand and new products substantially -- doing substantially well, really meeting a significant need in the market.

That's helpful, Udit. May be one for Amol on the guidance here, Amol. Revenues, you beat the Q by 800 basis points versus your prior guidance, right, $68 million for Q1 that annualizes to 200 basis points. You look at the annual guide raise, it was raised by 200 basis points. So I'm curious -- Udit just said, order book is trending well above revenue. So is that perhaps conservatism in a China lockdown or perhaps some macro? Maybe just talk about what the guide is assuming here for the year?

Yes. So thanks a lot, Vijay, for the question. So look, I mean, we are raising our full year guide by approximately 2% at constant currency. What is sort of dragging it down is how the U.S. dollar has moved between our last guide and this guide, right? So when we guided last in February, there was close to $25 million FX headwind on the full year revenue. Now it's at $85 million. So almost $60 million headwind coming in on top line. And likewise, on EPS, that is a $0.25 incremental headwind versus what we guided before because now the EPS headwind is at $0.45. So that's all factored into our guidance. Despite some of these challenging macroeconomic conditions, we are raising both our revenue guide and our EPS guide. What that does assume is 6% to 8% Q2 and sort of a 5% to 7% second half of the year. And again there, we are putting our guide prudently given the macroeconomic conditions and we continue to monitor that.

Yes. So Vijay, I think just maybe one other comment to build on this. Look, we're super, super pleased with what's happened in Q1. I think there will be no doubt about that. It's a broadly good performance across instruments, across consumables, across all geographies and end markets. That said, I mean, there are still geopolitical issues. There are still macroeconomic concerns and there are still supply chain challenges out there. And we feel that it's prudent to guide the way we have. And I think that's really what's going on into our -- in our mindset at this point. But it's still a raise even despite all those challenges, it's still a raise from what we have said in the past.

[Operator Instructions] The next question is coming from Rachel Vatnsdal of JPMorgan.

So first, could you just walk us through your latest at rent pricing for the year. You previously flagged about 150 bps but inflation continues to be a concern. So -- can you reach me on that this year at all? And then have you faced any pushed back from your customers on price increases at all so far?

Rachel, thank you for your question. Look, let's take a step back and I would just now think about pricing alone. We have -- our gross margin has gone up in the quarter by about 40 basis points and the operating margin, about 170 basis points, right? So that is the result of three things. One, of course, pricing which I'll get into in a minute but also productivity improvements and productivity due to a higher volume. And thirdly, new products, right, giving us even more leverage, right? So if I now just comment a bit more on the pricing. I mean we this quarter have seen about 200 basis points. And I'll also remind you that during this quarter, a lot of -- a fraction of the sales have come due to orders that were placed in Q3 and Q4 last year, where the pricing had not fully taken hold. So we feel very comfortable with where we are largely because we're collaborating very closely with our customers. I mean, there is a lot of conversation on pricing. Whenever we increase prices, there's a lot of discussion with our customers on why and what and where and when. So we feel reasonably comfortable that as long as our customers are aware of why we are doing, what we're doing and we're communicating transparently, we should be able to sustain the price increases.

Great. And then just another question on China here. So you flagged the 100 to 200 basis points of headwind in China during 2Q stemming from the current lockdown. So can you just talk about what you're seeing in that marketing or confidence and how quickly China can return to growth post lockdown? And then for China, you also flagged that CROs had over 50% growth year-over-year. So can you just spend a minute talking about what specifically drove that outpaced growth in the China CRO segment.

Thanks, Rachel. I mean China, look, despite the rolling lockdowns has been one of the brightest stars in our overall geographic performance. Broad-based growth, again, pharma and industrial both growing, so 17% growth for the quarter for China, led by pharma and industrial both in the mid-teens, even academic and government was in the low teens this particular quarter. So -- and the underlying demand is based on a lot of what we see globally. So great execution of our initiatives, including instrument replacement, including the -- the traction of our new products Arc HPLC and Acuity Premier in particular and really great demand for our products in the CDMO segment where we grew over 50%. And I'll remind you, the value proposition we offer is not just the products. It's really training our CDMO customers on method transfer and method development for complex molecules. So overall, the quarter has been great for China despite the fact that for the last week, we saw some headwinds for our recurring revenues when the access was limited. So really pleased with what we've been able to do. Now going forward, we anticipate 100 to 200 basis points of headwind in the second quarter, largely because the lockdowns are still sporadic and they're not over. We're starting to see them ease but it's very difficult to predict how open the market is going to be and how open the access is going to be. So while we are optimistic overall on China and we think we'll end the year with low double-digit to mid-double-digit growth, our mid-teen growth for the full year and we have -- we are really optimistic about the trends that we see in China. I think it's just prudent to sort of manage Q2 with 100 to 200 sort of basis points of a headwind versus what we've already seen in Q1. So I think -- I hope that gives you enough context, again, very optimistic about the market, really happy with the execution, both on new products and customer traction and in the long-term, super optimistic but in the short-term, a little bit careful about how we think about the market.

The next question is coming from Dan Brennan of Cowen & Company.

Great. Congrats on, obviously, a very strong quarter. Maybe could you walk us through a little bit, Udit, on the instrument side, I don't know if you quantified what the new instrument impact was in the quarter. I know you spoke about year-over-year growth. But could you back up a little bit and just give us a sense of what the impact was? And also if you could remind us as we think about the new instruments and the opportunity, kind of what's baked in for 2022? And then kind of related to that, could you discuss -- I know you alluded to it earlier but can you discuss what you're seeing from an end market growth basis and a share gain basis?

Okay. So I'll take it one step at a time. And if I forget any I'm sure, Dan, you'll remind me that I won't answer your question fully. So overall instrument growth at 26%. We don't usually break down the contribution of new products to that. I mean you can imagine in the way I would just back out that number or back out new products and execution by just comparing it to the overall market. I think you'll agree with me that the 26% number really reflects a very, very strong performance versus what we're seeing from our peer group. And that has two contributions. One is the operational excellence, instrument replacement increase -- and increase in the traction of new products. And our new products, it's broad-based, right? It's not just LCs, it's also mass specs now, right? So from an LC perspective, you have Arc and Acuity Premier and Acuity Premier, in particular, really targeting biologics and novel modalities applications. Now you turn to the mass spec portfolio where we, of course, launched our MRT platform, really great feedback from customers. That's a high-resolution mass spec. But then the Xevo TQ-XS Absolute -- that we've just -- the Xevo TQ Absolute that we've just launched. And that has incredible traction and not surprisingly, right? It's 15x more sensitive than the leading mass spec on the market for anionic compounds and anionic compounds are ones that are ubiquitous in mRNA and oligonucleotides but also pesticides in food and environmental testing. So really a strong introduction. And what I'm most proud of is it's not just performance but it has a lower footprint and a lower environmental footprint. So 50% less consumption of electricity, 50% less generation of heat versus the top tandem quads in the market. So super…

The next question is coming from Josh Waldman, Cleveland Research.

One for Amol and then one for Udit. Amol, I wondered if you could provide a bit more color on the moving pieces in the updated EPS guide, there may be a full bridge. I mean just trying to get a better sense on how variables beyond FX, like the stronger revenue, improved margin outlook were factored into the guide and maybe if there are other offsets going on beyond FX?

Sure. Thanks, Josh. So look at it from two vantage points, right? So on a full year basis, we are raising our EPS guidance but that does include a $0.25 incremental headwind versus the guide that we provided in February. And so in a way, if you say, look, we beat consensus in Q1 by about $0.45, $0.25 of that is lost in year to go in sort in FX and the rest of it, we are increasing our guide on EPS, plus or minus a little bit of spending timing switching between Q1 to Q2. So it's largely consistent with how we are guiding full year revenue increase and most of the gap is largely driven by change in FX assumptions.

Okay. And then Udit, maybe a follow-up on Vijay's question. Can you talk a bit about pacing in the first quarter and maybe how sales track versus order intake rates? Is it fair to assume that we have the 16% organic growth, you saw some relief on the supply chain side and we're able to work down backlog or have orders remained such that your backlog continues to be at kind of an elevated level entering 2Q maybe similar to where it was as you entered the first quarter.

In fact, Josh, thank you for the question. But in fact, the orders outpaced the sales yet again, right? So the backlog continues to build. So the fact we did not have to draw down the backlog to achieve the incredible results that you saw in the quarter. If anything, I would attribute, of course, it to the operational performance in the quarter and really the strong dedication of our teams. And this question keeps coming up, how did you deal with the supply chain issues? So I will not sit here and tell you that it's all over, yes. And that we are after three quarters of dealing with the supply chain challenges. We know exactly what to do. But we have an algorithm and I'm knocking on wood while I say this, that seems to work. Number one, we have really spent a lot of time studying the supply chain of key materials, including semiconductors and what additional materials that are based on this -- on the chips industry that go into our instruments. And so we have a deeper understanding of the supply chain to produce these semiconductors, the Tier 2, Tier 3, Tier 4 suppliers. Second, we've invested a ton of time on collaboration, right? So I have personally met the Top 7 suppliers of chips that go into our instruments. We have incredible collaboration across Waters. I mean it's a -- I mean I like to call it as -- I like to call Waters as a large startup where we have deep relationships that have been built over many, many years and they help us in times that are difficult. And we have collaboration with our customers. So often, we will have a conversation with our customers if something is short on supply. We will basically try to substitute it with something else. And then finally, third piece is collaborative problem solving, right? When you build these relationships, it's easier to solve problems with folks when you get into trouble, right? So -- and it's not just true within the organization, we're sitting down with customers asking what should be replaced with what rebuilding some of the chips, moving ethernet ports from one location to the other. I won't get into more details. And all of us are on the ground floor. This is not a spectator sport, right? Amol, me and lot of our senior leaders across the board, we are on the ground floor talking to our customers. So it's really I would say, operational excellence, deep collaboration and an understanding -- and a deeper understanding of the full supply chain, really not -- didn't have to tap into the backlog to achieve these results. I hope that gives you more color.

The next question is coming from Puneet Souda, SVB Securities.

Really impressive growth here in instruments indeed. Maybe, Udit, just pulling back to a higher level, when you look at the pharma and the 29% growth number that you mentioned in U.S. What is driving this demand when you talk to the customers, modalities, specifically more importantly, are you seeing this demand come from new facilities expansion among CDMOs or versus the demand from the existing facilities because obviously, you are outpacing what the demand would -- I mean, the strength we're seeing from peers as well, the peers are growing but you guys are obviously ahead of that. So just trying to understand at a high level, what is the sort of the dynamic across pharma and given the backdrop of these macroeconomic environment right now?

Thanks for the question, Puneet, it's really broad-based. But it, again, starts with operational excellence. I mean, the five initiatives that we've mentioned earlier we have a new-ish leader in the United States. Our sales has a long tenure in Waters but he was newly appointed right before I got here. And he's just been incredible with his team, right? We've put more feet on the street. We have been using our CRM system really religiously to get an understanding of where the demand is. And there was a replacement backlog built up in the U.S. for our instruments. The new products have done extremely well. E-commerce is doing better in the U.S. than anywhere else and the CMO traction is very, very good in the U.S. Turning then to new products. I mean you're well aware, these new products have been designed specifically for our biologics customers, right? And we start with the BioAccord which I know you know extremely well. We repositioned the product to go upstream into clone selection and that's gaining a ton of traction. Downstream in QA/QC, the work that we started about two years ago with several large pharma players who have significant monoclonal antibody pipelines, we're seeing them gain -- seeing the product gain traction in QA/QC and that bodes well for the future. Second, MAX peak columns and Acuity Premier as a technology was custom designed for biologics that have affinity to metal surfaces. And that product -- that set of products has gained a ton of traction. And most recently, the Xevo TQ Absolute. I mean it has terrific performance as hardware and lower environmental footprint. So all of that combined, meaning operational excellence, new products, a leader who's really sort of embraced collaboration and embraced the operational excellence is really what's behind the U.S. doing as well as it does. And that, of course, has an impact on the gross margin as well.

That's great. And then a brief follow-up on the BioAccord actually. We recognize that the field team was doing a number of demos throughout the quarter in the last couple of months for BioAccord and bioprocessing applications and you're obviously highlighting the University of Delaware work that you're doing here with the new center. Maybe just help us understand when should we start to think about meaningful contribution from some of the new bioseparations initiatives and broadly bioprocessing customers, taking on BioAccord?

Puneet, I'll repeat what I've said also in the last quarter. I mean we've basically said, look, in the short-term, you should expect us to grow 5% to 7%, about a 1% impact of our five initiatives. And in the midterm 2024 onwards, you should see Waters going to the sort of range where you should start to see an impact of these new initiatives, right? And is it a bit sooner? Is it a bit later? I mean, I can't be more precise. All I can tell you is there's a ton of traction and just staying with the bioseparations area, just staying with the BioAccord in particular, there's a ton of traction for what we're doing with Sartorius, for clone selection. The BioAccord, just as it was initially designed has sort two very large applications. The first is on spent medium where we can analyze close to 200 analytes. So our customers in that category are interested in a simple instrument but they don't want to give up any of the sophistication. They don't want to look at five compounds and 15 compounds. They still want to look at 200 compounds because they are still trying to ascertain at that point which of these -- what race quantities of materials are going to impact their cell culture. So BioAccord is simple to use but a highly sophisticated instrument. And I think that's really important to keep in mind when you think about spend media. And then, the other application is on peptide mapping and the drug substance itself, the whole drug substance. And there, again, the applications are very wide. And here, where Waters has an advantage is with our ability to develop simple workflows, right? So our customers, again, are not willing to give up the sophistication. They want to know each amino acid in the sequence of the peptide, they want to know the confirmation. They want to know the size of the molecule. They don't want to give up any information. They want the instrument to be simple to use, the workflow to be simple to use and we're developing a whole bunch of workflows on that front. And again, feel extremely good about it. As I said, mid -- you should -- in the midterm, you should expect 100 basis points of sort of growth impact based on all the sort of adjacencies that I've talked about in the past. I can't be no precise on that but I can tell you there's a lot of excitement amongst our team and the customers in applications of bioseparations as well as bioprocessing.

The next question is coming from Matt Sykes of Goldman Sachs.

Congrats on the quarter. Udit, maybe just big picture first question. I mean one of the things that you did earlier in 10 year was to try to bring the R&D and commercial functions closer together? And then noticing how the new instrument demand has really picked up and pretty successful launches. How much do you attribute to the success of these new products to some of the reorganization you did within the R&D commercial teams? And how much more there to go for in bringing those two close together? Like should we look for increased momentum with the new products because of the changes that you made?

It's a great question and thanks for asking a more sort of qualitative question. Look, I mean, it's a question of collaboration, right? I mean Waters is known for its technical excellence and closeness to customers. But I think by bringing the commercial team closer to our development colleagues, we're now as we think through our launch process and Jon Pratt will talk to you a bit more about it in our Investor Day in a few weeks. As we brought these two teams together, we're able to bring the commercial input much sooner into development, number one. Number two, there's a lot more ownership from our commercial teams, not just the understanding but also a lot more ownership from our commercial teams as we launch the new products. And without a doubt, that has a lot to do with the traction we've seen with the MAX peak premier columns. The sales team are super excited the Acuity Premier, the Arc HPLC which was a demand or a request from our customers through our sales team and the R&D teams responded to it. And now as they are closer together, they sit in operational reviews together. I chair and Innovation Board where we have both commercial as well as R&D input. And I can tell you that has a significant amount to do with how we are seeing new products pick up in the market and the feedback, right? So I mean, in this space, you don't expect to hit a home run in the first day that you go out to bat, right? So you basically have to get feedback from our from the customers and those -- that feedback goes back into R&D seamlessly, right? And the best example of that is our software launch, right? We launched our [indiscernible] one application for -- with Waters Connect, basically a compliant compliant-ready software. And some of the customers wanted enterprise capabilities with that software. So our development team got that feedback very early on and has developed the solution. Same is true with BioAccord. Early on, we went head first into QA/QC that was a few years ago. Now with closer collaboration between commercial and R&D sitting at the same table as the customers come back and say, "Hey, I want a simpler workflow for oligos because that's my pipeline or I want a simpler workflow for spend media. That's what the R&D team focuses on optimizing. So it's -- I could go on and on. I mean, it's incredibly exciting. And as a former researcher myself, I find the discussions very pragmatic, hugely collaborative and a learning experience for both parties, both commercial as well as R&D.

Great. And then just quickly, just to maybe on the academic end market. Just talk about trends you're seeing there. You had some pretty strong growth in China. But maybe ex-China, what you're seeing in the academic end market in this quarter? And what you're looking for, for this year?

So academic and government did especially well both in the U.S. and in China. And I would separate the two things, right? I mean again, I mean, we are -- while we have performed in line with many of the peers we've already reported with academic and government, I don't want you to assume that our turnaround in academic and government is finished, right? We have just begun remapping the KOLs, we started to work much harder on the e-procurement e-commerce availability for academic institutions. So there's a lot more to go. But the U.S. and China did super well in the first quarter. And the U.S., in particular, had a lot of traction, again by putting more feet on the street by talking to customers more directly. China benefited from the VAT -- the VAT expense or the VAT regulation being relieved a little bit step by step, right, so the customers are purchasing from what they had in the past. I would not assume that we've already turned the corner there, right? While we have good results this quarter, we are still working on it. And so I expect more from that segment.

The next question is coming from Jack Meehan of Nephron Research.

I wanted to ask about recurring sales. Just given the instrument upside in the first quarter, what does guidance now assume for chemistry sales for the remainder of the year? I was curious whether you think some of this bolus of upside here could have some carry through on the recurring growth expectations?

Yes. So Jack, great question. I mean the instrument growth will continue to drive recurring revenue growth, both chemistry and service. At this point, our guidance sort of assumes service and chemistry would be around high single digits, low double digits for the second half of the year. But again, I mean, this thing is not just here and now, right? These instruments will continue to produce revenue for the next seven, eight years. And the way we are performing on instrument replacement, we also think our instruments are recurring revenue because we've now built muscle strength and systems and processes so that the entire organization looks at instruments as a requiring revenue.

And then, look, I mean, there to -- historically, we've seen recurring revenues slightly higher than mid-single digits in the best years of Waters. And we've now for few quarters running in double digits or low double digits, right? So even this quarter, if you account for the one day fewer than the previous year, recurring revenues would be almost 10%, right? So we feel extremely good about it. In particular, the new product contribution and what we're seeing from our service team, right? So the new product contribution being MAX Peak Premier and a very rich pipeline that is specifically targeted towards large molecules, I mean what -- - is the world leader in separations and we are really turning our attention to complex large molecules, collaborating with our customers. And on the service side, remember we talked about increased attachment rates. That is also -- that is continuing to contribute and our attachment rates for our service. Services are increasing. So it's not just the translation of instruments to consumables and service. It's also unique contributions of new products and interesting innovation on the service side. So really excited. I mean, as I said, couldn't be prouder of the team across the board, there's been great performance.

And plus e-commerce is accretive and CDMOs are high volume. So they are all adding up to recurring revenue.

And our last question is coming from Dan Arias of Stifel.

Amol, just as a follow-up to the things that you've done on the supply chain, how much inventory safety stock on critical components would you say you have at this point?

It's a great question and a tough one, Dan. I mean, we try to build safety stock wherever we can find the inventory. The situation on electronic components hasn't improved any bit versus Q4 or Q1. It's a five day in, day out. So I mean part of that is in the $54 million or so that the inventory has gone up. But there are components where we have a production plan in Q2, likely for a demand plan in Q3 where we may be missing components still and we continue to try to solve these problems either with the suppliers or with the market or through innovative engineering. So -- if you were to assume everything is solid and in inventory, we are far from a that's a story with everybody. I mean what life science tools buys from electronic component suppliers is less than probably single-digit percentage of their annual production. So in a way, everybody is in the same Q behind cellular networks and vehicles, right? So the fight is on and we continue to navigate it day in and day out.

Yes. And Dan, it's an excellent question. Look, as Amol summarize, it's a deeper understanding of the supply chain, not just ours but also the chips and who else is getting them [indiscernible] in a lot of discussions across Tier 1, Tier 2, Tier 3, many top-to-top conversations and then finally, collaboration and creative problem solving. I mean that's what's gotten us this far. And our teams are continuing to do it, the fights far from over, right? I mean we see it still out there. But I think if there is an algorithm, again, as I said earlier, knock on wood, as I said, we seem to have something in our hands and our teams are dedicated to solving these problems. Let me now thank you for your participation. And on behalf of Waters' management team, I'd like to thank you for your continued support and your interest. I would also like to make you aware that we are hosting our 2022 Investor Day in just over two weeks on May 19 in New York City at the New York Stock Exchange, starting at 8:30 a.m. Eastern Time. The main presentation from the event at 10 a.m. will be broadcast -- will be webcast live on our Investor Relations website. If you would like to join us in person for the event, please reach out to our IR team via the contact details on Slide 13. Thank you very much and have a wonderful day.