Good morning, and welcome to the Waters Corporation Third Quarter 2024 Financial Results Conference Call. All participants will be in a listen-only mode until the question-and-answer session begins. This call is being recorded. If anyone has objections, please disconnect at this time. It is now my pleasure to turn the call over to Mr. Caspar Tudor, Head of Investor Relations. Please go ahead, sir.

Thank you, Julie. 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. We will provide guidance regarding possible future results as well as commentary on potential market and business conditions that may impact Waters Corporation over the fourth quarter of 2024, full year 2024 and 2025. These statements are only our present expectations and actual events or results may differ materially. Please see the risk factors included within our Form 10-K, our Form 10-Qs and the cautionary language included in this morning’s earnings release. During today’s call, we will refer to certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP measures are attached to our earnings release and in the appendix of the slide presentation accompanying today’s call. Both are available on the Investor Relations section of our website. Unless stated otherwise, references to quarterly results increasing or decreasing are in comparison to the third quarter of fiscal year 2023. In addition, unless stated otherwise, all year-over-year revenue growth rates and ranges given on today’s call are on a comparable organic constant currency basis. Finally, we do not intend to update our guidance predictions or projections, except as part of a regularly scheduled earnings release or as otherwise required by law. Now, I’ll hand it over to Udit to deliver our key remarks. Amol will then present a more detailed overview of our results and guidance. After, we’ll open the lines for questions. Over to you, Udit.

Thank you, Caspar, and good morning, everyone. Our team delivered very strong results third – very strong third quarter results with revenue, margin performance and earnings per share all significantly ahead of our expectations. Sales were well above the high end of our guidance range as each of our three reported regions returned to positive growth. Strength was led by our Pharma & Industrial end markets, both of which saw liquid chromatography returned to positive sales growth. Together with an improvement in mass spec, instrument growth turned positive in the quarter which exceeded our pace of recovery. We also built excellent momentum as we delivered mid-single digit quarter-over-quarter revenue growth while orders outpaced sales for the second quarter in a row. In addition to the positive strength in Instruments, we saw an acceleration in recurring revenue growth which grew a healthy high single digits. This was led by 8% growth in our chemistry consumables portfolio. Within our P&L, our sustained focus on operational excellence led to better than expected gross margin and operating margin results. Coupled with the strong top line performance, we achieved adjusted EPS growth that was over 10% higher than the midpoint of our guide. Results like this in a dynamic market – in dynamic market conditions take exceptional dedication from all our colleagues. I would like to take a moment to commend our team for their commitment to commercial execution, operational management and innovation. This enables us to deliver enhanced performance and accelerate the benefits of pioneering science. On the subject of innovation, we do made excellent progress and further strengthened our alignment with higher growth testing areas that will augment our future growth. We continue to expand our innovative portfolio with new product launches that solve customer unmet needs in both our core markets and…

Thank you, Udit, and good morning, everyone. In the third quarter, sales of $740 million grew 4% as reported, and exceeded our guidance range. On a constant currency basis, sales increased 4%. We saw a steady improvement in customer spending throughout the quarter. This, coupled with our continued strong commercial execution, enabled us to deliver Q2 to Q3 sales step-up of $32 million or plus 4% versus typically a modest decline as we created good momentum. Funnel activity strengthen and orders outpaced sales for the second quarter in a row, enabling us to build backlog. In constant currency terms, by end market, Pharma grew 3%, Industrial grew 7%, and Academic and Government was flat. In Pharma, sales returned to positive growth. Ex-China sales grew mid-single digits with 3% instrument growth and 7% recurring revenue growth. Both small and large molecule applications grew in the quarter as customer CapEx spending trends continued to gradually improve. In Industrial, sales also returned to growth. Growth was led by food and environmental applications, which grew 5%, and chemical analysis, which grew low double-digits. We again saw strong growth from PFAS-related applications, which have been continued growth tailwind within food and environmental applications. For our TA division, sales grew 2%, led by growth in life sciences and advanced materials and chemical applications. In Academic and Government, growth was flat, reflecting an improvement versus the first half of the year, now that last year's tough prior year comparisons are behind us. By geography, all our three reported regions returned to growth, with mid single-digit sales growth in Asia and Europe and low single-digit growth in Americas. Excluding China, sales grew 5%, led by better-than-expected growth in both pharma and industrial applications. In China, sales declined mid-single digits, reflecting continued sequential improvement versus almost 30% decline in…

Thank you, Amol. So to summarize, we are very pleased with the faster-than-expected return to positive instrument growth. We're also delighted to have observed a notable upshift in new product adoption, which has contributed to our growth this quarter. Our increased full year guidance now has us at positive adjusted EPS growth versus last year at its midpoint as we expect to build leverage in our P&L, even with return of annual incentive compensation among the other headwinds of volume and FX that we've described. We're positioned well for the future, with a long-term outlook that is above our historical average growth rate of 6%. This is driven by the associated new testing capacity needed for a compelling set of global volume growth drivers as well as other factors such as price contribution. At the same time, we start to benefit from a catch-up in deferred instrument replacement as customer CapEx spending recovers. The pace of this catch-up will depend on the speed at which the market continues to improve. We are in the early innings, and the market remains dynamic, but we're off to a good start. With our team's strong commercial execution, highly competitive product portfolio and strong margin story, we are confident in our future. So with that, I will turn the call back to Caspar.

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

Thank you. [Operator Instructions] Our first question comes from Tycho Peterson with Jefferies. Your line is open.

Hey. Thanks. Congrats on the quarter. Obviously, early innings on the replacement cycle, Udit, as you noted. I guess couple of questions here. Are you able to talk about the percentage of LCs that are going to customers that have ARC or is it mostly lab that did not upgrade, so effectively a double upgrade here? And then you have the new PEA module, I guess, how much is that helping drive LC sales? And then as we think about the next couple of years, I mean, you mentioned patent expirations, you also potentially have GLPs moving to orals. Like what other drivers should we be thinking about that could potentially help this replacement cycle as it kicks off?

Thanks, Tycho, and good morning. Look, I mean, very happy with the fact that instruments have returned to growth. And if you break it down into LC and mass spec, LC after seven quarters of decline and this is I think where your question on the replacement cycle is largely focused, after seven quarters of decline, has returned to growth. This is, of course, on the back of continued strong growth in India, of which where the generic segment is doing extremely well. But equally, with return to growth in our large pharma QA/QC customer segment where LC grew in the low single-digits, both in Europe and in the United States. And another sort of corroborating set of evidence for the replacement at the beginning of the replacement cycle is when customers and we spent a ton of time and I personally did in this last quarter with large pharma customers to understand what we were seeing from a replacement cycle perspective. Look, when the customers start their replacement cycle, they bring cross-functional teams together because this is a multiyear process. They bring in ID; they bring in the analytical labs. They bring in the procurement folks and sometimes finance folks because this is a pretty large spend item, and we have seen more and more of those meetings. Now to your question on ARC versus Alliance, I mean there is an increasing proportion of our LC fleet that is ARC HPLC and now increasing the Alliance iS, which, over the last 18 months has been trialed by each and every large pharma customers. So we feel extremely good with the feedback. And over the last few months, we've added the PDA, we've added the Alliance Bio System, and we have several other ideas to continue to improve its performance. So Alliance iS is indeed playing a part in the discussions. ARC HPLC remains a strong, strong contributor to the replacement discussions as well. We won't break it down any further than that at this point. And to your question on patent expiration, I mean, and I suspect that's referring to India. Look, India has been awesome for us for the last three to four years, gone from 5% of our sales to 8%, largely driven by a strong presence in the generic segment. I mean India supplies roughly 40% of the generics globally. And going forward, we expect at least $200 billion over the next three, four years of patent, sorry, next four to five years of around $200 billion of revenues going off pattern from originators in the next three to four years and more than half of that is small molecule. So we are very well positioned in that segment as well.

And just to add to that like Udit. As you correctly pointed out, I mean ARC is a meaningful price premium to legacy Alliance, and that has been a very successful product and very accretive from being better priced. And with the value proposition of Alliance iS, it's able to justify even a higher price premium to ARC because the unmet needs that it is solving is resonating with the customer. So that sort of creates that double effect on the replacement cycle. And very early days for PDA, so the PDA version really hasn't produced accretion because we're just launching it. So we will see more of that in Q4.

Right, so in a nutshell, the replacement cycle definitely signals for the reticent cycle beginning, some impact already in the quarter and our broader market-leading LC portfolio is absolutely playing a role in those discussions.

And then I guess, as we think about next year, are you willing to make any comments preliminarily, the Street system [ph] was 5.5% organic. Obviously, there is a tailwind...

I was thinking that, that would be one of the more – one of the questions later in the call, but I suspect it's one of the first ones. Look, you know that we won't make any comments on 2025 at this stage. I mean there's a lot that will play out in the next few months. But so not to disappoint you, let me just sort of tell you how we are thinking about the puts and takes, right? So you can start with our recurring revenue. And if you look at especially the last two years, it's like a Swiss clock, right? I mean while recurring revenues in different segments, especially in pharma research, have gone up and down, in QA/QC and late stage for us, this has gone predictably well. So you can assume a long-term historic average, and that's 55% of our business. You start there. Then you look at the puts and takes on the instrument side, right? And so let's first talk about what is rather definite, right? So the generics volume, as we just talked about, will continue to grow. Now don't ask me exactly the percentage of growth, but it's pretty dynamic. Second, PFAS Testing is accretive to our overall growth, and we have a market-leading instrument that is helping us win more orders than we lose them. And GLP-1, you already mentioned that, we have pole position in that with the two largest producers. And as it gets genericized, and Indian producers come in, we think we are very well positioned. So those are things that you can assume are positive. There are two variables that we really need to sort of watch and understand better. The first is how fast as the replacement cycle is going to pick-up. And I've given you enough clues in your first question that it's already happening and the discussions are happening. And the second is the stimulus in China, right? And there, we feel that we're incredibly well positioned given the expansion of distribution, given the expansion of our localized portfolio, we feel incredibly well positioned to capitalize as the stimulus comes in. So I think those are the only two variables that you need to watch over the next three to four months, and there's plenty to happen in the next few months, and we'll talk when we give the Q4.

Just one thing to add there is pricing, right? Even in this environment, where we are seeing aggressive competitive pricing pressures, we are still delivering on our commitment of 100 basis points plus versus the historic levels, and the proof is in our gross margin.

Okay. And then just one last quick one on capital allocation. Amol, you talk about preference for M&A versus buyback. You mentioned both in your comments?

Look, Tycho, again, something that we won't get into a ton of detail – a ton of detail on other than what we've said. Look, we're executing on what we told you probably three, four years ago when the transformation started. We said we were going to learn how to play better with the hand we have. This is commercial execution and margin preservation that you saw all the way through in 2023. Then we said we're going to launch new products that are going to be first-in-class and best-in-class, and they're delivering the promise, be it Alliance iS, Xevo TQ Absolute or our chemistry columns. And third, we said we're going to start executing on M&A, which is aligned with our well-stated and clearly stated strategic ambitions, and that's where Wyatt fit in. So from a capital allocation perspective, that's the sequence. We will spend more energy on organic growth. We think we have a ton of opportunities there. If a deal makes sense like it did with Wyatt and it's aligned with our strategy and it's financially very disciplined, we will do it. And of course, we will continue to return value to our shareholders through buybacks, but it's a balanced capital allocation strategy.

Thank you. Our next question comes from Brandon Couillard with Wells Fargo. Your line is open.

Hey. Thanks. Good morning. Udit, you took down guidance last quarter, taking it back up now. Can you just talk about like which end markets actually beat your expectations? And it does feel like the LC replacement cycle may be coming back faster now than what your base case might have been two or three months ago. Is that a fair assessment? And talk about just which region might be driving that?

So Brandon, good morning and thank you for your question. Look, I mean, everything across the board came ahead of expectations, right? So I think you can see that in the print as well. And as we go into Q4 and our sort of guidance philosophy, look, you need to look at it from two different perspectives. One, all the positive drivers we expect that we have seen improve over the year will continue into Q4, right? So through the year, sequentially the growth has gone up and Q3 was 4%, including the LC replacement, we see better signals for that. We see the generics market going pretty well between the PFAS testing that I've just gone through that in the previous question as well. So we see all of those trends continuing. And hence, we've raised the midpoint of our – midpoint of our guidance for Q4 from a revenue perspective, so it's now 6%, right? So that has – the trends have given us confidence to raise the guidance. And so on the other side, the second aspect, and Amol mentioned this in the prepared remarks as well. On the other side, it's one data point. I want to see more before we get more bullish. So if you look at the top end of the guidance, what we've done is we tried to keep the ramp from Q3 to Q4 the same as last year, right? So just elaborate a little bit. Over the last three years from Q3 to Q4, the step-up in revenue from Q3 to Q4 usually is about 22%. Last year, we saw one of the most [indiscernible] ramps that we've seen in our history. And we felt was prudent keep that as the other book end of the guide. So while trends are improving across the board, pharma, industrial, any of the portfolio segments feel it's prudent at this point, sort of put it on the book and keep the ramp same as last year.

Okay. That's helpful. And then just on China, you have pretty mixed data points, I would say, so far from other peers this quarter. Is the signal to noise ratio from your point of view, getting any better? And how do you think stimulus is order activity quoting, is tracking relative to your expectations right now?

So I mean that's a great question. I had a chance to visit China in September, and I have the same questions that you do, and had a chance to visit a lot of customers, see some government officials across the country, not just in one city, and across many customer segments, right? So it was a pretty helpful visit. In all, I mean if you just look at the numbers for a minute, China came in line with our expectations. Orders are in line with what we saw at the same time last year. Sales went down by 5% versus the same time last year, and that's largely due to one shipment moving in the TA business from Q3 to Q4. So that impacted sales, but orders are in line with last year as we expected. Now that said, as the market conditions, and this is something I learned from our team, the market conditions have worsened over the last two years, I mean, our team basically first, of course, rightsized the organization to respond to the conditions. But then we took a deliberate effort to expand our distribution to many more customer segments than we've been historically present in. Second, we localized our full portfolio. So as and when the stimulus comes, we feel very well placed to capitalize on it. Now talking about the stimulus in particular, I mean, you know that the first one was on instrument replacement and the government is now thinking through releasing another one on fiscal stimulus, right? So pretty broad-based encouragement for the economy. We feel very well positioned to take advantage of it. And in the last quarter, I talked about one of the first discussions we had that looked like it could consummate into an order. This was discussions with customs agencies that our government run that has indeed come through. So that order has actually come through. The sales, don't ask me if it gets converted in Q4 or early next year, it's probably there or thereabouts. It's not in our guidance. And don't get too excited, it's low single-digit millions, but it is the first signal that the stimulus is now converting into sales. And as I said, we feel incredibly well positioned to take advantage of it. So in a nutshell, China came in as expected, improving conditions from the first half of the year into Q3. And as we look ahead, we feel incredibly well positioned to take advantage of the stimulus. And it's not just signals; it's actually turning into reality. I hope that helps.

Thank you. Our next question comes from Puneet Souda with Leerink Partners. Your line is open.

Yes. Hi Udit thanks for taking my questions and congrats on the strong frontier. First question, we're seeing varying numbers of instrumentation growth in the peers. I mean you have instrumentation recovering in LC and also MS, an LC replacement cycle is happening, where some of the peers are still saying mid-single-digit decline. So can you take a step back and elaborate a bit about the QA/QC position that Waters has when it comes to instrumentation growth? What do you think is misunderstood here? And on the consumables side, the 8% chemistry and columns number, that was impressive. Could you maybe provide us your thoughts on the sustainability of that? And what gives you confidence why that recurring revenue should continue to sustain in 2025 despite the comps?

Let's start with the simpler question, Puneet, and good morning. Recurring revenues for us are like the Swiss clock, okay? You go back in 2024 and you compare our recurring revenues to anybody in the peer group, and you'll find that they're very stable, right, mid- to high single-digits. And so there's not much to say there other than the fact that this is going to continue. And we're fueling it with new innovation, attachment rates and service are increasing. So if anything this starts to grow even more. And as we are at the cusp of the replacement cycle, you will see service revenues improve. So there's nothing more to say there other than just look at the history and the facts, and it's pretty clear. On the instrument side, this is how I would think about it, and I'll try to sort of break it down from a customer segment as well because your question had that piece. First, from a volume perspective, look, there are two obvious drivers, right? The first is generics in India, right? We have a strong position there, and that continues to grow, and it's not just in India, it's also in Eastern Europe and parts of the U.S. that we continue to benefit disproportionately from our presence there. Second is the initiation of the replacement cycle. And here, I'll just take a slight detail and talk about pharma, in particular, and that might explain some of the differentiated results here, right? And basically, for us, we are – our instrument results, our consumables results are more proportional to the volume of testing in compliant conditions, be it pharma or be it non-pharma. In pharma our stronger presence in QA/QC, testing for marketed drugs, both generics and originators makes us – makes us…

And just to add to your absolutely correct insight on the recurring revenues, right? No two recurring revenue portfolios are equal. And sometimes we get penalized because 45% of our portfolio is Instruments. But people overlook the fact that the remaining 55%, which is recurring, when you contrast it with other recurring portfolios in the market. In this down economy, the other recurring portfolios have been flat or even negative growth. Our recurring revenue portfolio as Udit says is a Swiss clock. It has always been between 6% and 8%, typically 7%. And people typically overlook this fact, right? And when you put that together, it sort of gives you so much more stability in the equation.

Got it. That’s super helpful. Thanks for covering that. Just a follow-up on the GLP peptides, obviously, one of the largest categories in terms of volume. And Udit you talked about volume being an important driver. Can you just help us understand sort of how broad is your position there? And essentially, as new molecules are emerging orals and improved injectables, can you elaborate what your position within those are? And just given the volume growth that you can potentially expect in this market. And how to think about this in 2025? I know it’s about 2025, but I’m just wondering how to think about GLP-1s in 2025 context? Thank you.

Puneet, you’re going to be super popular with your peers because you’re asking all the questions. But that said, look, it’s a relevant question. GLP-1s are accretive to our growth. And when you look at our position, in columns, we are the primary vendor specced in for both the two large injectable manufacturers for chemistry. Instruments are distributed between us and another vendor, but usually 60-40 us or slightly more than that, depending upon which one. And third, there are atline testing HPLC and UPLC instruments, where we have the lion’s share, and these are called PATROL Systems for those of you who have been following Waters, who will be very well familiar with it. They are adopted in each and every manufacturing site and each and every line of both Novo Nordisk and Eli Lilly. Now to your question on orals, we feel very good about where we are. It’s early days in terms of talking about exactly what spec and what’s not. But we are very well positioned, not just with these two, but with many others who are working on it. Third piece is around GLP-1s in the generic segment. As I mentioned earlier, we have a good position with the generics manufacturers in India and in Eastern Europe. And as they start to bring the older GLP-1s and start to genericize them, we again feel very good about our position there. 2025, I won’t say more, especially on the specifics of what will happen with GLP-1s, but there is no reason to believe that the trend doesn’t follow the overall volume growth that we have seen so far.

Thank you. Our next question comes from Vijay Kumar with Evercore ISI. Your line is open.

Hi, Udit. Good morning to you and congrats on the nice prints here. Maybe one on the competitive dynamics here. Do you believe Waters is gaining market share? Or is this a broader sort of end market recovery? How would you characterize your competitor position?

Vijay, thanks for the question. And I mean, having been in the industry over a decade, I mean this is question on market share is always [Technical Difficulty] using two things. And we discuss market share, share of wallet market share. Given that most of our peers have different portfolios in different segments, it’s very difficult to have direct comment other than your own information, which is longitude. So we have information for many years. And I can tell you, we are winning more than we’re losing across different segments. And just to sort of shed some more light why that’s happening. First, I mean, basically what we said four years ago, moved our commercial execution and basically follow each and every opportunity, [Technical Difficulty] system gives us incredible exposure, and our teams have worked really hard in the last two years to maintain and win very difficult environment. Second, we have a market-leading portfolio. We have podium position LC. We have podium position in quantitative mass spec to each other segment that very hard, increasingly developing high-resolution mass spec, Xevo MRT metabolomic testing, and we set standards for column testing [Technical Difficulty] chemistry. So feel very good about the portfolio going forward. So I think from a competitive standpoint, I can confidently say that we’ve been more than we lose [ph]. But if you pin me down and say what exactly is the market share point by point gain, I would need very trustworthy information from each of our competitors to add and subtract. And I’m surprised that people are able to make comments with so much confidence. I think we’re confusing to choose share of wallet and market share.

And just to add on. We don’t have IMS like data in our [Technical Difficulty], right? The only place where you can sort of gauge [Technical Difficulty] growth outsized towards this market. And for us, there are three vectors [Technical Difficulty] DFAS we are growing twice market, India. We do so much more better than the market, the clinical [Technical Difficulty].

Understood. And maybe, Amol, one for you on this guidance here. You beat the quarter by $25 million, annual was raised roughly by 25. When you look at the sequential revenue math, while I understand it’s consistent with last year, I think you have extra days in Q4. So maybe just talk about the guidance assumptions here in Q4. Is that conservatism or any pull forward of revenues from Q4 into 3Q? Thank you.

No, no, look, I mean, we want it to be prudent, right? I mean, we wanted to be in line with the ramp we saw last year. Last year, we saw about 15% ramp, which is far lower than typical. What we have guided is 15.5%. We have two extra days in the ramp this year versus last year, and that adds 2% more recurring revenue or 1% overall, right? So call it 16%. So maybe it’s a tad conservative and prudent at this stage in the equation. So that’s on the sales side. On the EPS side, our full year raise is slightly lower than our Q3 beat. And that’s to do with the fact with the timing of spend, right? I mean, we had pullback spend because September is a big month and we wanted to make sure it checks out to our assumptions, which it did. And plus we want to be ready as market starts to recover. And so that’s purely timing of spend. We’re still raising our full year EPS guide. And now the full year EPS guide is slightly positive versus last year.

And I think there’s two embellishments. One on the spend. Look, I mean, we are seeing dynamic growth in generics in India, in Eastern Europe, we’re seeing very good growth with the Alliance iS as the adoption improves. We’re seeing great growth in PFAS. We’re not pulling back spending. And so as teams come in, we are really making sure that they have the resources to grow in the future. And then your question on pull forward, no pull forward. You just need to look at the orders and sales, orders grew again faster than sales and backlog has been building. So no pull forward at all.

Thank you. Our next question comes from Dan Brennan with TD Cowen. Your line is open.

Great. Thank you. Thanks for the questions. Congrats on the quarter. Maybe just on – just to start on China. So in the quarter, what China instruments may be down around 10% is our math. I’m just wondering, did you say what your implied or kind of what your guide is for China in the fourth quarter and for Instruments? And Udit you talked about the stimulus like any way to size what that might be for 2025, and we come up with $70 billion in monetary stimulus being allocated broadly to Instruments and kind of science and tech, is that the number? And any sense of what percent the sector could capture that?

Yes. So look, I mean, China for the quarter was minus 5%. Instruments were down sort of high single digits for Q4 – and again, a lot of it, as Udit mentioned, has to do with the fact that orders were in line with last year. It was just timing of some of the TA-related shipments. As we get into Q4, we are expecting growth to return to China. So it will be sort of low single-digit to mid-single-digit growth in China, and Instruments will be somewhere around low to mid-single-digit decline. But again, as we said, we have had no major incremental negative news from China since Q3 of last year. And because we had finished shipping last stimulus in Q2 of last year, Q3, Q4 baseline for us in China is pretty corrected. Stimulus, I mean it’s hard to say at this stage because the biggest challenge is timing. Unlike last time, this is being rolled out through different provinces. And based on our read, every province is in different part of its journey in terms of getting all the paperworks and approvals together. So still very early days in sort of timing the stimulus as it will happen next year. I mean, it’s inevitable. It’s going to be a great tailwind for the sector, but hard to put…

And then, just to embellish this on the China piece, we were in China, September, as I mentioned earlier. I mean, the general sense is, yes, the stimulus is coming. We have many conversations with each individual customer who is looking to qualify. We expanded our distribution as a result to make sure we were in every place where there was a discussion going on. This one would be very dispersed. It’s not one that will be concentrated in two or three big academic institutions. So we’ve prepared ourselves. We’ve localized the portfolio. As I mentioned, we already see the first offer set of orders consummate. And as I said, I don’t know if it lands this year in sales or early next year, it’s low single-digit millions, but it’s a good signal that it’s happening. Very difficult to talk about timing at this stage. I mean that the next three months past will find out a lot more until that time. And I think you talked about the $70 billion, but there’s an equally important fiscal stimulus, that will create confidence in the overall economy, and that will influence the sector as well. So don’t forget that piece of it as well.

Got it. And then maybe just as a follow-up. Just – I know you’ve touched on PFAS and GLP-1 several times throughout. Would you be – I know you talked about the long-term opportunity in terms of contribution to your growth rate. Would you be willing to size how big those businesses are today and kind of how much they’re contributing today to your growth?

Yes. I mean what we’ve said is both those businesses will contribute about 30 to 40 basis points of accretive growth, and that’s based on purely the environmental side of PFAS. What we are seeing on PFAS is it’s now spilling into things such as food and consumer products, and that would be incremental upside to that 30 to 40 basis points of accretive growth on PFAS. On GLP-1, that assumption is based on what percentage of prescription volumes GLP-1 will be, say, around 20, 30 based on analyst reports. If you look at it in an alternative way, which is what percentage of CapEx GLP-1 will be over the next decade, you get to a much larger number. But at this stage, we would want to stay prudent.

Yes. And I mean I think the other way to look at this is you take a visit to Copenhagen, highly recommended, or go around Indianapolis and the number of cranes per square foot is higher than Cambridge, Mass where the biotech and [indiscernible] at its height as well when the biotech boom was going. So it’s pretty serious activity Dan.

Thank you. Our last question comes from Matt Sykes with Goldman Sachs. Your line is open.

Hi, good morning. Thanks for my questions. Congrats on the quarter. Maybe just going back to Instruments, and Udit, a comment you made about a catch-up opportunity. How do you see the slope of recovery as we kind of move into next year? And do you have expectations that it could outgrow that 5% historical average? I think it’s interesting to see the replacement cycle kicking in for you, and I think there’s still a lot of questions about how gradual that recovery will be and your comments around catch-up opportunities suggest there might be some pent-up demand. So maybe you could just kind of contextualize how you see this potential recovery taking place?

So I think – thanks, Matt. I mean I think the magnitude is pretty clear, right? I mean you can just look at historical numbers, do the CAGRs that we’ve been doing for so much time. And you can see the magnitude is pretty significant, especially for LC catch-up opportunity. In terms of the slope, I mean, just being fact-based, that can go anywhere from 0.5% to 11% growth quarter – one quarter to the other for the recovery. So it’s very difficult to predict based on facts. Now you can then rely on two other features. One is the funnels that we have. And there, I can tell you, since March, June and now September, the last quarter – the last month of every quarter tells you a lot about funnel conversion. It has been improving, right? So we’ve been seeing people say they’re going to do something, they do it. And they say they’re going to do large stuff. They do large stuff. They’re going to do small stuff, they do small stuff. So it’s the funnel conversion rates have been getting much more robust as we’ve gone through. So the predictions become way better. And the last piece is customer conversations, and I delved into the qualitative part of the conversation. We’re having an increasing number of cross-functional discussions with our customers where IT will also show up and procurement will show up, finance will show up. So those are the start of a multiyear replacement discussion where the CapEx is pretty significant for our large pharma customers. And I’m talking here about also non-GLP-1 customers. So I think that’s as much as I can say right now. And as I said, more will reveal itself in the next few months, and we’ll share it at the full year numbers.

Great. Very helpful. And then just when you look at sort of medium-term views on China, just given where the GDP growth has gone from where it’s been historically, how are you thinking about sort of medium- to long-term growth in China given your portfolio and your exposure there?

Lots of people way smarter than us have been speculating on this. I think the general sense at this point is it’s a mid-single-digit grower. And – if because it’s a developed economy, but if you have an advantaged portfolio, in some cases where we do, and you have better execution, you can outgrow that number. So I think that’s as much as we can say about that at this stage. And again, more will reveal itself, Matt, as time goes on.

Thank you for joining us today and for your support and interest in Waters. A replay of this call will be available in the Investor Relations section of our website. This concludes our call, and we look forward to seeing you at future events and conferences.

Thank you for your participation. Participants, you may disconnect at this time.