Good morning and welcome to the Waters Corporation Third 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. It is now my pleasure to turn the call over to Caspar Tudor, Head of Investor Relations. Please go ahead, sir.

Thank you, operator. Good morning, everyone and welcome to the Waters Corporation third quarter earnings call. Today, I'm joined by Dr. Udit Batra, Waters President and Chief Executive Officer; and Amol Chaubal, Waters 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. In particular, we will provide guidance regarding possible future results and commentary on potential market and business conditions that may impact Waters Corporation over the fourth quarter of 2022, full-year 2022 and 2023. These statements are only our present expectations and actual events or results may differ materially. For more details please see the risk factors included in our most recent annual report on Form 10-K or Form 10-Qs and the cautionary lanaguage included in this morning’s press release. During today's call, we will be refer to certain non-GAAP financial measures, including in our discussions of the results of operations. 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. Unless stated otherwise, references to quarterly results increasing or decreasing are in comparison to the third quarter of fiscal year 2021. In addition, unless stated otherwise, all year-over-year revenue growth rates and ranges given on today's call are given on a comparable constant currency basis. Finally, we do not intend to update our predictions all projections except as part of our regularly scheduled, quarterly earnings release or as otherwise required by law. Now, I'd like to turn the call over to Udit to deliver our key messages for the quarter, then Amol will provide a more detailed look at our financial results. After we will open the phone lines up to take questions. Udit?

Thank you, Caspar, and good morning, everyone. We continue to deliver excellent results in the third quarter with very strong growth across our product portfolio, our end markets and geographies. This was led by instrument growth of more than 20%. Similar to previous quarters, orders again outpaced sales. A result like this takes an exceptional effort and dedication from all our colleagues. We are very proud of what our teams continue to consistently deliver. Today, we have three key messages to share, which reflect the ongoing strength and exciting drivers of our business: first, we are consistently delivering strong commercial execution. Our transformation has become embedded in how we operate with a relentless focus on commercial excellence. You can see this in our results. Second, innovation at Waters is back. It's delivering across our portfolio and contributing meaningfully to our growth. Our refreshed product portfolio is answering our customers' unmet needs across a variety of applications. Adoption rates for new instruments have been impressive and are driving market share gains. Thirdly, our growth initiatives are gaining traction. We continue to make measurable progress on our high growth adjacencies and have proof points that are giving us confidence. Turning now to our third quarter results, our revenue grew 7% as reported and 15% on a constant currency basis. We saw broad strength across our end markets and geographies with robust demand from our customers. Growth in the quarter was led by industrial and academic and government, which both grew over 20% and pharma, which grew 9%. Each of our regions grew double digits. China grew over 20%, India grew 20%, Europe grew mid-teens and the U.S. grew 11%. Instruments grew over 20% with our LC, mass spec and TA portfolios each growing double digits. Mass spec growth was very strong at…

Thank you, Udit, and good morning, everyone. We delivered another excellent quarter in Q3 with 15% constant currency growth. Waters division grew 14% and TA grew 18%. By end market, pharma grew 9%, industrial grew 22%, and academic and government grew 29%. In pharma, we saw growth in both large and small molecule with strength across segments, applications and regions. In industrial, each of our major regions grew mid-teens or above with China up almost 30%, Europe up over 20%, and U.S. growing 16%. Growth was led by LCMS instrument sales, which grew 50% with our chemical analysis, food and environmental businesses, all delivering strong growth. In academic and government, growth was also strong across all regions. Now by geography, sales in Asia grew 18%, the Americas grew 11% and Europe grew 14%. In Asia, growth was led by China where sales grew 23% as we executed well across all trade classes, despite the challenges posed by new lockdowns. In the Americas, the U.S. grew 11% with growth across applications and end markets. Europe grew 14% in the quarter, led by industrial, which grew over 20% and pharma, which grew low double-digits. By products and services, instruments grew 21% with our LCMS and TA portfolios each growing double-digits. Recurring revenues grew 10% with chemistry up 10% and service up 9%. There was no change in the number of days versus the prior year's quarter. Finally, TA had another great quarter with sales up 18%, led by strong growth in thermal analysis and rheology. Demand for TA products remained strong across all regions with sales in electronics, and batteries continuing to ramp. Gross margin for the quarter was 56.7%, compared to 58.9% in the third quarter of 2021. We had incredible growth in instrument sales this quarter with MassSpec growing nearly…

Thank you, Amol. In summary, we're very pleased with our performance. Demand has continued to be robust across our resilient end markets and geographies. This together with our strong commercial execution and refreshed portfolio is allowing us to consistently deliver excellent results. Once again, we're raising our full-year sales guidance from a prior range of 9.5% to 10.%, now to 11.5% to 12%. In closing, I would like to point out that our 2022 ESG report will be released next week. At Waters, we're proud to have been widely recognized as an ESG leader. We believe that we all have a part to play in leading the world better than we found it from decreasing our environmental footprint to becoming more representative of the society we live in. This year we've made further progress towards our goals, delivering approximately 60% of our electricity from renewable or low carbon sources. We launched the Water Student Academy and are partnering with three historically black colleges and universities to provide STEM education and career opportunities. We also conducted broad stakeholder engagement in our comprehensive materiality assessment. We are proud that our new state-of-the-art chemical manufacturing facility in Taunton, Massachusetts was recognized by the U.S. Green Building Council as the only lead certified facility of its kind in the state and among the small number in the United States. While there is always more work to be done in ESG, I'm proud of the progress we've made. So with that, I'll turn the call back over to Caspar.

Thanks, Udit. That concludes our formal comments and we are now ready to open the phone lines for questions.

We are now ready to begin our formal question-and-answer session. [Operator Instructions] And the first question is coming from Vijay Kumar of Evercore ISI. Your line is open.

Hi, guys. Congrats on a really strong print share. Udit, maybe my first one for you on this revenue outperformance in the Q, big picture when you look at the state of end markets, whether it's a pharma CapEx environment, replacement cycle or industrial, you know, perhaps macro situation. Talk about the big drivers here on what's happening and whether any of these drivers should change for ‘23?

Sure. So Vijay, firstly, thank you. Look, from a demand perspective, I mean, we are operating in very resilient end markets, right? I mean, starting with pharma, which is 60% of our business. And I'll remind you that we are more levered to late stage development and QA/QC. Pharma continues to grow and even if there is a downturn, people don't stop consuming medicines, right? So I think that we believe is a very strong place to be. Second is our industrial business, which over the years has transformed and is heavily focused on our food and environmental and increasingly the TA business on battery testing and the need for safe food, clean water, especially with PFAs testing, as well as battery testing is our salient drivers. So roughly 80% of our business is levered towards, I would say, resilient end markets. Now in those rather resilient growing end markets, I think there are water specific drivers that I'd like to point out that gave us confidence in continued outperformance, right? So if you just simply start with our commercial initiatives, right? I mean, we see those continuing to add value over the next couple of years, be it instrument replacement, be it e-commerce, which is well over 30% now from a 20% starting point for our consumables revenue. But we think we're going to end up north of 55% over the next few years. CDMO footprint has increased quite nicely over the -- on a stacked basis over the last two to three years that, that portion of the business has grown double the rate of the overall business, almost 20%. So we think our commercial initiatives have run way number one in these strong markets. Second, as I pointed out in my prepared remarks, innovation is really contributing…

Really that's helpful, Udit. And maybe one quick one for you, when you look at the margin performance, inflation, FX and mix were the main three components. When you look at ‘23, should we expect any perhaps some margin expansion? I know FX is a headwind not sure how to think about the impact of inflation on the margins and in mix?

Yes. So, Vijay, look, I mean, on the gross margin line that are sort of four vectors that are playing out, right? There is FX, there is a higher instrument mix, there is new product launches, and then there is the pricing inflation dynamics that I just discussed. And each of these vectors are going to be accretive in driving gross margin expansion in the times to come. I mean, on the FX side, we really feel excited about the fact that despite this headwind, the business has rallied to find ways to offset the impact of exchange rate. And when the exchange rates normalize, you will see a much more pronounced impact on the margin, because of the resilience that has already played out in our 2022 numbers. On the instrument mix, I mean, it's a great problem to have. While this instrument growth is creating somewhat of a headwind on the margin today, it is going to drive accretive recurring gross margin growth from chemistry and service in the future. We've seen also great growth from our new products and it sort of underscores that innovation matters in this space. But as you can understand, anytime when you launch new products, they haven't gone through the typical value engineering cycle that they go at Waters like we've gone through with Alliance. And we will see that play out on the gross margin of these newer products in the coming years. And then the last piece is the pricing inflation dynamics, right? And there, the pricing gains are systemic, we've built muscle in terms of systems and processes to drive pricing gains more than what we have historically driven, which was 50 basis points to 75 basis points. And on the other hand, a lot of inflation is spot buys. And as the electronic component market, sort of, normalizes, some of this spot buy pressure will go away again providing tailwind to the gross margin. So overall, I mean, we are still on track where we say, look, I mean, we will have about 100 basis points of margin expansion in the underlying business between volume leverage, mix and productivity gains. And we will reinvest 70 basis points to 80 basis points of those gains in nurturing our higher growth adjacencies in the near-term.

The next question is coming from Dan Brennan of Cowen. Your line is open.

Great. Thanks for Udit, thanks for taking the questions. Maybe just as a jumping off point as we kind of look ahead, you just kind of addressed a little bit of the margin drivers. I know at the Investor Day you talked about ’23, still feel good about mid single-digit plus. I'm just wondering, doesn't sound like anything has really changed, but just wondering is that still the right zip code as we sit here today, which would imply a three-year stack acceleration from what you're doing? And then kind of related to the prior question given the FX headwind that you're talking about for next year, three to four points, it would imply kind of modest top line growth. So in a modest top line growth environment, kind of, what's the ability to expand margin in ’23 if that's fair?

So Dan, firstly, thank you for your question. Look, I'll start and then I'll pass over to Amol. The 5% to 7% we talked about those in a different context, right? I mean, from a constant currency -- on a constant currency basis, I mean, we’ve been clocking well ahead of that, as you know, right? So year-to-date, I mean, you see it close to 14% growth on a three-year stack basis, it's almost a double-digit growth, slightly shy of a double-digit growth. So we're really well ahead of that. And that's not just strong end markets, but also really strong execution of our commercial initiatives, which still have some legs over the next year -- next couple of years. We're seeing innovation really starting to contribute meaningfully to this growth of course, helping with the instrument replacement, but also improving our biologics footprint. And then finally, our adjacencies are also starting to contribute especially the bioanalytical characterization and the battery testing initiatives. So we feel very good about where we sit today. In terms of what we expect for 2023, there'll be ample time to discuss that in our Q4 earnings and there's a bit more data to be collected before the year-end, as you can imagine, in such a turbulent environment we want to take our time to think through what that will look like. But sitting here today, we feel very good about what we've told you in the past in terms of drivers, wherever the market is. You can assume that our commercial execution will add on top of it. Second, innovation is really meeting the unmet needs in the market. And third, our adjacencies are starting to contribute especially to Biologics and the batteries part. So feel very good about where we sit more to come in Q4. Amol?

Yes. And then covering on the margin, right? So I think at this stage, we feel really good about where each of our initiatives are? I mean, our volume leverage is working with a strong instrument growth this year, we think that will have an accretive mix impact on the recurring revenue, bringing better gross margin profile next year. We do see, sort of, the level of spot buys slowing down and we have gained a lot of confidence and comfort in the systems and processes that we've implemented for pricing. So all of that will enable us to stay on the track that we outlined at our Investor Day, which is still roughly 100 basis points of underlying margin expansion with a 70 basis points to 80 basis points of reinvestment in higher growth adjacencies.

Great. Thank you. And then maybe just a follow-up on instruments. Obviously, you spent a fair amount of time already, but we'd love to sort of expand, but I mean, the 40% MassSpec growth is just very notable and the 21%, the 10% three-year stack is really strong. So maybe could you just step back, Udit, and as you look at all the adjacency opportunity, new innovation opportunity, like what's the right way as we look ahead on the durability of kind of instrument growth for Waters?

It’s a fantastic question, near and dear to my heart. Look, I have made it a point to go to many of the conferences that, that many of the technical conferences like the AAPS, this is the American Association of Pharmaceutical Scientist, where I went recently the Bioprocess International, the AACR just to talk to customers directly and not just drink our own Cool Aid. And I can tell you our MassSpec portfolio is solving fairly significant unmet needs across the portfolio. Now we've talked about LC in the past, Arc HPLC and ACQUITY Premier, what they do for especially ACQUITY Premier and MaxPeak Premier columns? What they do for biologics testing? On the MassSpec side, you can go across the portfolio. High res portfolio, our cyclic IMS, is the only instrument that is able to analyze molecules by shape and size, which is quite an important attribute to have as you're looking at larger molecules and that's direct feedback from our -- from some of our top customers. And Cyclic has been doing very well recently. The MRT, which we launched recently, the multi reflecting ToF is in its early innings. We've also got the license for Charge Detection MassSpec. And we feel very good about our IRS portfolio as a consequence. Second, the application of tandem quartz, this is sort of the workhorse instruments in the industry, right? I mean, I already talked about Xevo TQ Absolute and the Waters Connect Black -- Waters Connect software that we developed for our Xevo TQXS, which is the food -- which is level towards the food testing environment. This is a very deliberate effort, Dan, right? I mean, the challenges in environmental testing with increasing the sensitive, increasing amount of sensitivity required for PFAs testing is something that's known to…

The next question is coming from Matt Sykes, Goldman Sachs. Your line is open.

Hi, good morning. Thanks for taking my questions and congrats on the quarter. Udit maybe the first question just on China, it seems that for you and others that China lockdowns have been less impactful this time around than previously. Could you maybe talk about what has changed there? Is it just where the lockdowns are occurring? Or if you change the way that you're managing that business over there to adjust to that type of environment? So should we expect maybe less volatility in China going forward?

Matt, it's an excellent question. Something that we think about and talk about a lot in our team. Look, make no mistake there are rolling lockdowns across China going on even now. That said, we have as I mentioned previously, we have a very strong leadership in China that we brought in over the last couple of years. And we've managed to navigate these lockdowns really well. And I hope -- and I think that's not going to change over the next few quarters as this continues. Now just looking at the facts, I mean, year-to-date, China is going roughly 16%, I mean, this quarter was roughly 23% and the growth -- and again, I focus more on now what is specific factors. I mean, the growth is driven by our strong commercial execution, the instrument replacement driven by our Arc HPLC. And now MassSpec has contributed to the revival of the academic segment where the business has almost doubled and the industrial segment as well, right? So been very good about what we're doing across end markets, not just in pharma. Our contract manufacturing initiative has done extremely well. And we started in China with strong growth with a biologics manufacturer, biologics contract manufacturer there. The commercial execution has been going extremely well in China. Innovation is contributing like everywhere else geographically. The MassSpec tandem quad portfolio has again helped us grow the food and environmental and the electronics testing market. And then finally, as we look ahead, we feel that the fact that we've been able to navigate through these ups and downs gives us a lot of confidence as things ease up that we will continue to accelerate in China. So China remains a strong growth market for us. We feel very good with the leadership we've had and the execution we've had that we can manage the volatility that we've seen so far.

And good to add to that, Matt, right? For Q3, China benefited with a lower baseline, because of the $12 million shipment delay last year, so that's about 10 percentage points of growth. But at the same time, they did have a headwind from some of the newer lockdowns, so one has to keep that in mind. And as Udit outlined, you know, for us, the team is executing really well and working towards a mid-teens growth profile for the year.

Great. And thanks for that, and then just one quick one for you, Amol. Just on inventory, there's obviously a lot of focus on the customer side inventories. But as you think about your own inventory, can you think about the potential visibility of demand as we go into ’23 and it still could be somewhat uncertain? How are you thinking about building your own inventories to solve for the supply chain constraints that still exist, but also for maybe a more uncertain demand environment in ‘23?

Yes. So I mean, what we've done is we've looked at sort of our product profile and we've gone through bill of materials for pretty much every product and gone through secondary and tertiary supply chains and identified hotspots where a certain component that travels through the supply chain is sort of in shortage. And there, we've gone deep to build relationships with the primary supplier and have secured quantities that will last us for longer than usual times, right? And where possible we have built alternative supplies especially for electronic components and where possible we will also build geographical diversification. So you're sort of not stuck in a lockdown in China or in a place where you have a sole source. Now that has put some pressure on inventory, because we've sort of accumulated this inventory in preparation for the demand that we are seeing on the instrument side and in preparation for potential supply disruptions that may be caused by COVID or other sort of macroeconomic events. But at this point, we feel really good where supply chain stands, right, progressively a lot of the yellows have been resolved and things are sort of between green and yellow on most of the items.

The next question is coming from Luke Sergott of Barclays. And your line is open.

Hey, guys. Thanks for the question or questions, can you dig in here what you're seeing on the CDMO side, there's been a lot of mixed signals coming from peers and also CDMOs themselves. Can you just give us a sense of how you guys are seeing that market shake out and what your -- how you're factoring that in as you start planning for next year?

Luke, thanks for the question. Look, I mnea, let me just start with some context and then I'll answer your question, right? I mean, when we started our transformation process CDMOs were, I would say, less than 20% of our pharma business. And we worked -- and this is, as you know, one of the most dynamic segments for the pharma business. Over the last couple of years, we worked extremely hard to build tools, systems, processes and go after that customer segment. And the growth in that segment over the last two years has been double the dynamic growth that you see, right? So if you see our three year stacked growth number, it's almost double-digit, it's about 9%. CDMO growth has been close to 20% right? So the overall demand for us and our value proposition in that market has been recognized very widely. And the value proposition I'll remind you is not just one of pricing and giving better lease terms, it's actually a technical value proposition, meaning as more complex molecules are transferred from pharma and others into CDMO, our scientists are working hand in hand with our CDMO customers to help them transfer those processes from the Pfizer and the Merck’s and the AstraZeneca’s of the world. So the value proposition is recognized, we've done extremely well so far. And yes, we're following the volatility in the CDMO market. Now I'll give you an example, right? So global CDMOs like any other multi-national have global footprints now, right? And if there is a geopolitical driven volatility, for instance, either in China or in the United States, what we are seeing is if any of our customers, CDMO customers is starting to look at diversifying their footprint, they're coming to us and saying, hey, I'm no longer going to expand my facility, as an example, in China or no longer going to do it in the U.S., I'm going to actually diversify to Ireland or diversify to Singapore they come to us first. And so for us, the overall demand given our deep relationships with our top customers in the CDMO space, has not fluctuated, right? So we find that to be a very strong growth segment for us. It might just shift geographically given all the geopolitical challenges that are occurring. And with a lot of repatriation, our CDMO customers are diversifying. So hope that clarifies why we still remain confident that while individual geographies might suffer a little bit. We pick up the volume in other geographies. And by and large, none of our customers have come back so far and said, hey, we want to slowdown.

Okay, great. And then you talked about service a little bit. And as you guys continue to drive a lot of strong instrument growth, can you update us on how much you've expanded your installed base? And then talk about the service attach rates? And what's driving part of your strong service growth? Is it more about just placing new boxes? Or is it also driving that incremental service revenue per instrument?

Yes. So let me start and then I'll hand it over to Amol. So we had started with the aspiration, Luke of increasing our service attachment rates by and it's already industry leading. We wanted to expand it by about 1,000 basis points, meaning 10 percentage points. We've already done 200 basis points so far in the last year and a half or so. We still see a long runway of increasing our attach rates and this is through many different tactics, right? So quoting at the point of sale, having automated renewal, and several other tactics that I won't discuss openly due to competitive reasons. We feel extremely good about the increasing attach rates for any installed base that we have. Now with such terrific instrument growth with LC, with MassSpec double-digit over on a stack basis, I mean 21% year-to-date, soorry 19% year-to-date, 21% for the quarter. We feel very good that we should see that flow through in the service business over the next few years. I know Amol is super enthusiastic about this and he gets very analytical with our teams and says, you've grown your base this much, your service should go up this much. I'll let him comment a little bit.

Yes. Luke, I mean, it's a great question. And the way we look at it is, let's say, when you grow instruments by 21% your installed base doesn't grow by 21%, right? Because the installed base on an average is, let's say, seven years, and so you get a 3% bump if all these instruments were new placements. But close to 70% or 80% of them are replacements. So they are sort of not adding to the installed base, the new ones are. But also on the ones that you replace, you expect higher utilization at least on chemistry. So all of these become available to what you can drive your recurring revenue on. And as we've pointed out on service, we've been very successful 200 basis points last year and this year, we said we would do 100 basis points and we already did 100 basis points in the first half of the year. And again, there one has to think not all of it is incremental revenue, because these customers are already buying spare parts from us outside of the plants. So the incremental revenue is sort of a fraction of what the attachment rate would bring. But overall, with this great instrument growth, we feel really excited how much recurring revenue we can drive both on chemistry, as well as on service in the years to come.

Yes. And just to sort of summarize, Luke, the simplest way to think about it is if we replace 100 instruments, 20 to 30, closer to 30 these days are new customers and new users, right? And they will then convert into service revenue, de novo service revenue, add on top better service performance with increased attachment rates gives us confidence that the increased installed base, especially the newer ones are going to add incrementally to service growth over the coming years. And of course, consumables attachment is an added benefit.

The next question is coming from Rachel Vatnsdal of JPMorgan. Your line is open.

Okay, thanks. Thanks for taking the questions. So first off here, I mean, we've had a few of your peers just talk about changing in ordering patterns from customers throughout various end markets. Just as supply chain constraints have slowed down, so you're seeing customers returning back to normalized ordering patterns. So just wondering if you've seen anything in line with that across any of your end markets, earning a no shift in those ordering patterns from your customers so far?

Rachel, on the orders to sales ratio, right? So our orders have again grown more than the sales this particular quarter. So orders were higher than sales. Again we have not seen, I would say, any sort of significant change in order patterns so far this year. I mean, it's a very robust pipeline, we're very -- and again, I'll remind you, I mean, we're not dealing with volatile end markets. Close to 80% of our end markets are highly, highly resilient. Second, our products are very innovative, right? I mean, we are now meeting unmet needs for our customers, right? So we don't expect customers to stop ordering the Xevo TQ Absolute, because they need it and it's the most sensitive instrument in the space for testing PFAs. We don't expect customers to stop ordering Xevo TQ XS with Waters Connect, because it's 50% faster than any competitive instrument in terms of analysis. We don't expect them to stop ordering ACQUITY Premier or Arc HPLC given the benefits that they get. So innovative products in resilient demand segments don't seem to be impacted by what you are pointing out. So we are not seeing any of that. And I think it could be a water specific thing. I mean, as I mentioned earlier, the demand overall is good, but we also think we are doing some specific things, which are deliberately improving our traction with our customers, especially from an innovation standpoint.

Great. And then just a follow-up here on M&A, can you just talk about how the pipeline is looking? And then anecdotally, we've heard that those private valuations on the private side of things have still remained high? So what have you seen from that and kind of what's the latest timeline for when you think that you could maybe get a deal done here? And then finally, what type of leverage range would you be willing to reach for the right size deal in any of those high growth adjacent markets that you flagged?

Sure, Rachel. I mean, M&A is something we're thinking about quite regularly, right? I mean, but I’ll just remind you sort of our overall capital allocation priorities, right? I mean growth is the imperative, we're seeing tremendous organic growth and that remains the number one priority. I mean, we'll invest in CapEx and OpEx as Amol mentioned earlier about 80 basis points even in this environment to support our growth ambitions. We feel extremely good about that. Second, to support the growth, we're looking at M&A opportunities and the pipeline is very robust, not just in the adjacencies, but also in the coal. In some areas they are richer than others, of course, you can imagine I can't comment more specifically on it. And if we don't find something that is financially reasonable and sensible, will of course continue to do buybacks as we've done in the past. But growth remains the priority. As far as timing is concerned, that's always better to comment in the rearview mirror. Amol, do you want to talk about the leverage ratios?

Yes. I mean, in general, our thinking is, first of all, we want to be absolutely financially disciplined and make sure that on a risk adjusted basis any transaction creates value for our shareholders. And then in terms of financing, we want to stay investment grade as much as possible or even lower. So that the interest rates have gone up and that can create a dilutive impact on EPS accretion. But as long as we are sort of within investment grade, we should be able to thread the needle.

The next question is coming from Derik De Bruin, Bank of America. Your line is open.

Great. Thanks for taking the question. This is Mike Ryskin on for Derik. I want to ask one for you, Udit, I think you specifically said one asked me when this is going to slowdown, but I still kind of have to go there first. Can you maybe try to parse out some of the components of the growth? I mean, we hear you on the innovation, we hear you on, sort of, the robust markets, but still these are really impressive results quarter-after-quarter. So any additional clarity to get maybe, kind of, rank ordering, share gains versus replacement cycle versus how much is new lab construction or new end markets? You spent a lot of time talking about PFAs and how that's becoming more and more prominent? So just maybe going through and saying where you -- what are you seeing as the biggest contributors to the step up in growth? And that will hopefully give us a little more clarity and how durable this will be going forward?

So Michael, I can give you the algorithm, and I'm going to disappoint you that I'm not going to give you very, very deep specifics on each of these. So just to review the drivers, right? First, I mean, the end markets that we serve are resilient and robust, as you know, right? So 80% as I've talked repeatedly are pretty robust and we feel good about the resiliency of these end markets. Now whatever that number is historically been X and now it's definitely X plus delta X, some of it driven by volume and some of it also driven by increased pricing, right? So take that as a starting point. Then from a Water specific standpoint, there are three different contributors. We had said at our Analyst Day about 100 basis points, you can expect probably a bit higher this particular year from our commercial initiatives, instrument replacement, CDMO, service, as well as e-commerce, all of those are contributing quite handsomely and so definitely north of 100 hundred basis points this year. What we're seeing very nicely now dovetailed into that is the second independent driver, which is innovation, right? And I took some time today and I’ve -- and we had a big debate internally how much we should elaborate, but I felt it was necessary given the questions that I think you guys have asked on the durability of growth. Innovation is really, really contributing already significantly, right? MaxPeak Premier fastest launch in Waters' history in terms of columns. And we've been launching columns since 1970 and some of them are still in the market and this one's done better than anything they’ve launched. Second, the MassSpec portfolio is totally revived and we're definitely in the early innings of extraction. PFAs testing is a significant need…

This will conclude our question-and-answer session for today's call.

Thank you.

And this will conclude our conference for today. All parties may disconnect at this time.