Waters Corporation (NYSE:WAT) Q4 2022 Earnings Call Transcript

Waters Corporation (NYSE:WAT) Q4 2022 Earnings Call Transcript February 15, 2023

Operator: Good morning and welcome to the Waters Corporation Fourth 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 is being recorded. If anyone has any 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.

Caspar Tudor: Thank you, Catherine. Good morning, everyone and welcome to the Waters Corporation fourth quarter earnings call. We are very pleased to be speaking to you from Santa Barbara this morning where Wyatt Technology is located. We have a lot to cover today given our exciting €“ given our earnings results and our exciting announcements. Today, I am joined by Dr. Udit Batra, Waters’ President and Chief Executive Officer; and Amol Chaubal, Waters’ Senior Vice President and Chief Financial Officer. We are also glad to be joined by Wyatt Technology’s Chief Executive Officer, Geof Wyatt; as well as its President, Cliff Wyatt. Now, 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 future possible results and commentary on potential market and business conditions, including with respect to the announced transaction with Wyatt that may impact Waters Corporation over the first quarter of 2023, full-year 2023 and 2024. 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, 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, 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 were available on the company’s website.

Unless stated otherwise, references to quarterly results increasing or decreasing are in comparison to the fourth 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 predictions or projections except as part of a regularly scheduled quarterly earnings release or as otherwise required by law. Now, I’d like to turn the call over to our President and Chief Executive Officer, Dr. Udit Batra. Udit?

Udit Batra: Thank you, Caspar, and good morning, everyone. Before diving in, I would like to extend our thoughts and our prayers to the thousands of those who are affected in Turkey and Syria by the earthquakes. Today marks a major milestone in accelerating value creation for our customers and shareholders as we progress to the next step in the execution of our strategy. This morning, we made the exciting announcement that Wyatt Technology, the recognized leader in light scattering will be joining forces with Waters, bringing with it a fast growing, attractive business with key capabilities to accelerate our 1.8 billion double-digit growth opportunity in Bioprocess Characterization. More than 40 years ago, Wyatt was the first commercialized light scattering instruments incorporating lasers as their light source.

Ever since they’ve defined and redefined state-of-the-art light scattering instrumentation, software, and services. Along the way, we’ve also added several related technologies including dynamic light scattering, viscometry, refractometry, and field-flow fractionation. Together, the innovative products are used to determine the properties of novel therapeutics such as cell and gene therapy, vaccines, and proteins, as well as synthetic polymers and nanoparticles. Wyatt was the top asset and priority we identified for bioanalytical characterization, making the acquisition a significant step forward in this high growth adjacency. I would like to take this opportunity to invite Geof and Cliff to say a few words about this exciting combination. Geof?

Geof Wyatt: Thank you, Udit. We are thrilled to be with you here today at this incredible moment for our company. For over four decades, Wyatt Technology has delighted customers with industry leading innovation in light scattering, characterizing life enhancing large molecule therapeutics. Our common scientific heritage deep mutual respect for science-based innovation and a passion for customer success makes Waters the ideal steward to propel our family legacy into its next chapter. Now Cliff, would you like to add anything?

Cliff Wyatt: Sure. Thank you, Geoff. I would like to echo your comments and also Dr. Wyatt’s sentiment that we could not have been more excited, but could not be more excited about this combination. Waters will broaden Wyatt global reach scale and will accelerate deployment of light scattering technologies in downstream and QA/QC spaces, integrating this technology onto Waters’ well-established empowered platform. Waters is such a natural and logical fit for us in this next exciting chapter of Wyatt’s history.

Udit Batra: Thank you, Geoff, and thank you, Cliff. We are honored to get this unique opportunity to carry Wyatt forward into the future. This combination is a fantastic opportunity to integrate our powerful analytical technologies, which are highly complementary to each other. And as you highlighted Geoff, our shared deep scientific culture and common passion for customer success will accelerate integration and drive value creation for our customers and shareholders in the years to come. Today, Waters has a strong and growing portfolio serving large molecule separation and characterization, which are approximately 30% of our pharmaceutical revenues. These applications serve high volume downstream workflows in biologic development and QA/QC Central Labs using LC-UV and LC-MS.

Wyatt’s significant exposure to the very fast growing biologic applications will build on this presence and will give our customers an unmatched set of analytical solutions across large molecules, including gene therapy and viral vectors. For Wyatt, as Cliff mentioned, this combination will provide expanded geographic reach and will accelerate the adoption of light scattering and downstream applications through our established presence and empowered informatics platform. As you can tell, we’re excited to share more details about the strategic benefits of this combination. However, this is our fourth quarter and our full-year earnings call, and we have some excellent results to share with you first. So now, I will cover our key messages and financial results for the core business.

Then we will continue outlining the value of this combination as we take this next step in the evolution of our strategy. Looking at our financial results, we ended another very successful year delivering strong results in the fourth quarter with growth across our end markets. This was led by yet another outstanding double-digit instrument growth quarter. Our incredible performance this year would not have been possible without our dedicated and talented colleagues. We overcame numerous macroeconomic and pandemic-related challenges throughout 2022, including global supply chain challenges, COVID lockdowns, inflationary pressures, and currency headwinds, all while responding to high customer demands for our products. Today, we have three key messages, which reflect the strength in our core business and the exciting future that lies ahead.

First, we continue to deliver consistently strong execution. You can see this in our 2022 performance where we sustained strong growth after a stellar year in 2021. You can also see this in our three-year CAGR of approximately 9% in constant currency, where our results have placed us amongst the top players in the industry since the beginning of our transformation. Second, our revitalized portfolio has contributed to our growth and we expect this to continue. New products have resulted in growth opportunities in large molecules, applications, PFAs and battery testing, while supporting strong instrument replacement. Third, while we have accomplished a lot in the past 2.5 years, we are now augmenting our organic efforts with M&A to accelerate our journey into high growth adjacencies.

Turning now to our fourth quarter results. Our revenue grew 3% as reported and 9% on a constant currency basis. We saw broad strength across our end markets and regions with robust customer demand. Industrial was again our fastest growing end market, up 14% led by environmental testing, which grew over 20%; and TA, which grew mid-teens. Pharma saw continued robust growth, up 6% with strength in both small and large molecule applications. Strength was set by Europe, which grew low double digits, offset by headwinds in China. Academic and government grew 8% as in increased activity and funding resulted in strong year-end spending in several of our geographies. Instruments grew double-digits net by mass spec. New products contributed across our portfolio with Arc HPLC, ACQUITY Premier, and cyclic unit sales growing over 40% percent.

Meanwhile, our newest instrument launches Xevo TQ Absolute, and Xevo G3 saw excellent continued traction with very strong demand. Recurring revenues grew high single digits supported by our e-commerce and service attachment growth initiatives. Our Q4 non-GAAP adjusted earnings per share was $3.84. This is up 5% year-over-year, despite FX headwinds of 8%. For the full-year, revenue grew 7% as reported and 12% in constant currency. 2022 was a very strong year for Waters where we executed well throughout the organization against a challenging macroeconomic environment. Our growth was broad-based across our geographies and end markets. Each of which grew low-double-digits or above. This strength was led by instrument sales, which grew 16% for the year with LC, mass spec, and all growing double-digits.

For the full-year, non-GAAP adjusted earnings per share was $12.02. This is up 7% year-over-year, despite FX headwinds of 9%. Now, as we enter 2023, our end markets remain robust and healthy with strong customer demand for our products. These attractive end markets growth drivers and are well funded. We saw solid auto growth in the fourth quarter and our backlog remains at elevated levels. We expect the strong instrument sales we saw in 2022 to drive future growth in our recurring revenues. So, our end markets are healthy. We’ve regained our commercial momentum. Innovation has been revitalized and we have strengthened our organization with new leadership capabilities, bringing a proven track record in transformation. Now, we’re entering the next phase of our execution strategy as we accelerate our path toward faster growth.

This brings us now to the chart on the next slide. As you can see, biologics manufacturing is a complex process and we have shared an example which shows how large scale monoclonal antibodies are produced. It starts with the upstream production of the drug substance where the raw material components are fingerprinted and monitored during initial cell culture creation before the protein or antibody of choice is produced. Then in downstream manufacturing, cells and debris are separated from the in a series of filtration and separation steps. Each step involves numerous stages of testing to ensure that the product is stable and effective. Then as a last step, in QA/QC, the final purified drug product is formulated and filled in vials of prefilled syringes.

Throughout the process, different tools and technologies are required for characterization, depending upon what you need to analyze liquid chromatography with ultraviolet detection or LC-UV is used extensively across all four stages. At the same time, mass spec is increasingly being used with BioAccord seeing a lot of traction in cell culture media characterization, clone selection and process optimization in both upstream and downstream manufacturing. It is also seeing adoption in QA/QC applications. We shared details on this at the beginning of the year and have included a slide in the appendix. In addition to LC-UV and LC-MS, powerful techniques such as dynamic light scattering and multi-angle light scattering are also used to give relevant information about the size, molecular weight, and aggregation of biologics by combining the data from each of these detectors our customers can develop a more comprehensive profile of their biologics.

This is essential to speeding up the manufacturing process and reducing the cost of complex biologics such as cell and gene therapies. The bioanalytical characterization market is around 1.8 billion growing around 10% to 12%. Waters already has a strong established position in LC-UV and LC mass spec, whereas Wyatt Technology is a pioneer in light scattering. Hence this combination is a fantastic opportunity to integrate our powerful analytical technologies, which are highly complementary to each other and will accelerate our journey in this opportunity. Let me now ask Geof to describe the company and its highly innovative portfolio. Geoff?

Geof Wyatt: Thanks again, Udit. Well, Wyatt is a remarkable company and we owe much of its success in high growth applications to our amazing team. Our flagship technology is multi-angle light scattering MALS, which is used by leading biopharma, biotech, and academic institutions to measure fundamental properties of complex biologics, including cell and gene therapies, mRNA vaccines, biopolymers, biosimilars, and therapeutic protein. We’re based here in Santa Barbara, California and have 225 outstanding employees of whom roughly 25% have Ph.D.’s. Over the past 40 years, we’ve built Wyatt into the recognized leader in light scattering detection, defining the segment very much like Waters did for liquid chromatography and mass spectrometry.

Our sales have grown around 20% on a three-year CAGR to approximately $110 million in 2022. We’re also a highly profitable business with an adjusted operating margin of approximately 40%. More than 80% of our revenues are in large molecule applications. Our biopharma customers are eager to use light scattering for QA/QC applications and have been keen for us to combine our software with Empower. So, you can only imagine how excited we are with this combination, which will add additional choices and capabilities for our existing customers and let us delight even more. Back to you, Udit.

Photo by RephiLe water on Unsplash

Udit Batra: Thank you, Geoff. I look forward to welcoming our new colleagues to Waters. Let’s now talk about some of the benefits that integrating Wyatt and Waters’ capabilities that provide for our customers. In our existing Waters portfolio, our separate complex mixtures into individual constituents for both property analysis by UV and detailed characterization by mass spec. These are properties such as titer aggregation and protein sequence. A missing piece has been additional critical information about the intact molecule, like the Empty/Full capsid ratio of adeno associated viruses or the size of lipid nano particles or mRNA therapies. These will be augmented by Wyatt’s MALS detectors, which will allow our customers to develop a more comprehensive critical quality attribute profile for their biologics.

This is essential to fully characterizing their manufacturing process. In each case for these tools to gain successful adoption in point of view settings, they must be: Number 1, sophisticated, but simple for use in high volume applications, such as what we’ve already demonstrated with BioAccord; Number 2, supported by leading service like Waters already has to help run workflows and respond to evolving needs; And Number 3, and most importantly, they need to be connected to a common informatics platform so that all the data comes together in one place. Our ambition is to create an ecosystem of sophisticated, yet simple instruments that can all use Empower to collect data and submit to regulators. No differently than what Waters established for small molecules years ago.

This transaction will create a number of compelling revenue synergies and results in an attractive set of pro-forma financials. First, from a geographic footprint, Waters revenues are highly diversified, whereas Wyatt’s presence is concentrated in the United States. This provides us an opportunity to expand Wyatt’s geographic footprint in Europe and Asia, particularly in China. Second, HPLC instruments and size exclusion chemistry columns are sold together with light scattering instruments. We expect to see cross-selling synergies with our liquid chromatography instruments and chemistry. Third, Wyatt’s instruments and expertise will enable Waters to meaningfully accelerate the high growth adjacency opportunity in bioanalytical characterization.

This will give our customers an unmatched set of analytical solutions across large molecule applications and will augment our ability to create a comprehensive bioanalytical platform. And fourth, Wyatt’s portfolio is well-established in upstream development settings for large molecule applications today. Waters’ Empower platform, as well as our presence and expertise in high volume down-stream recurring applications will accelerate the use of light scattering and biologics manufacturing and in QA/QC. Now, to the pro-forma. The combination will increase our large molecule footprint to around 35% of our pharmaceutical revenues. Our increased exposure to these faster growing markets will raise the combined growth profile of the markets we serve by at least 50 basis points.

We expect the transaction to contribute more than 60 basis points to our annualized constant currency growth over the next five years. We also expect it to add more than 50 basis points to our industry leading adjusted operating margin. Net, we expect to realize a high-single-digit plus return on invested capital by year five, although we expect the Wyatt business to grow low-double-digits in the near-to-mid-term. In addition, we expect this combination to create more than 70 million in annualized revenue synergies by year five. Now, I would like to pass the call to Amol to walk us through further details on the financings. He will then continue covering our fourth quarter financial performance and provide our guidance for 2023. Amol?

Amol Chaubal: Thank you, Udit, and good morning, everyone. It’s been great to work with Geoff, Cliff, and the entire team at Wyatt Technology. Like Udit, I’m very thankful to the Wyatt family for considering us as the rightful stewards of their mission and legacy and for providing us this opportunity to create value for our customers and for our shareholders. Now, to the transaction highlights. This 1.36 billion investment will result in immediate accretion of our revenue growth and our adjusted operating margin percentage. The synergies that Udit just described, along with Wyatt’s highly attractive financials, are expected to result in accretive non-GAAP EPS impact as early as first quarter of 2024. Altogether, as Udit mentioned, this combination is expected to deliver a high-single-digit plus return on invested capital by year five.

We will fund this investment through cash on our balance sheet and existing debt capacity that is available on our revolver. On day one, our net debt-to-EBITDA ratio will be around 2.3. We will temporarily suspend our share buyback program for the remainder of 2023 and will utilize our free cash flow to pay down the debt through the rest of the year. We expect our net debt-to-EBITDA ratio to land at around 1.7 by year-end 2023. The transaction is expected to close in the second quarter of this year subject to regulatory approval and customary closing conditions. Now, to our fourth quarter financial results. We delivered an excellent close to a very strong year for Waters with constant currency growth of 9%. Waters division grew 8%, and TA grew 15%.

By end market, pharma grew 6%, Industrial grew 14%, and academic and government grew 8%, which Udit already covered. By geography, sales in Asia grew 7%, Americas grew 8%, and Europe grew 11%. In Asia, growth in region overall was strong. Japan grew 25% and India grew 15%. China declined low single digits for the quarter, as a sharp increase in COVID infections at year-end resulted in delayed spending due to customer site closures. We expect these headwinds from the post-zero COVID reopening to continue into the first quarter of 2023 before catching up throughout the remainder of the year. In other regions, the U.S. grew 8% and Europe grew 11% with broad strength across end-markets. By products and services, instruments grew 10%, led by mass spec, which grew over 30%.

Recurring revenues grew 7% with chemistry up 8%, and service up 7%. Finally, TA grew 15% with double-digit growth across our major geographies. Growth was led by sales in electronics, and battery applications, as well as strong growth in advanced materials and chemical testing. Looking now at our full-year results. By end market, pharma grew 10%, industrial grew 15%, and academic and government grew 13%. In pharma, growth was led by large molecule applications, which grew mid-teens, while small molecule grew high-single-digits. By geography, sales in Asia grew 12%. Americas grew 14%, and Europe grew 10%. By products and services, instruments grew 16% for the full-year with liquid chromatography, mass spec, and TA system sales all up double-digits.

In our recurring revenues, chemistry grew 9% supported by our strong launch of MAX peak premier columns in large molecule applications and further expansion in digital commerce adoption. Service grew 8% with continued expansion in attachment rates, which increased 150 basis points in 2022 and have increased 350 basis points since 2019. Now, I would like to comment on our fourth quarter and full-year non-GAAP financial performance versus the prior year. Gross margin for the quarter was 59.4%, up 140 basis points versus prior year, driven by sales volume and pricing, partially offset by inflationary costs. For the full-year, gross margin came in as expected at 58%. Operating margin for the quarter was 33.7%, growth of 110 basis points versus prior year, driven by gross margin dynamics.

For the full-year, operating margin was approximately 30.2%, which was flat with last year. On an underlying basis, we expanded our operating margins by approximately 100 basis points versus our guide of 20 basis points to 30 basis points at the beginning of the year. This is net of our investments in higher growth adjacencies and despite the higher instrument mix in our revenue. On an as reported basis, our expansion was offset by 80 basis points of FX headwinds and 20 basis points of additional compensation to help our colleagues with the temporary impacts of inflation. In the quarter, our effective operating tax rate was 17.6% and for the full-year it was 15.6%. For the full-year as anticipated, our effective tax rate increased by 180 basis points, primarily due to change regarding the capitalization of R&D costs.

Average share count came in at 59.6 million shares, which is about 1.8 million less than the fourth quarter of last year. Our non-GAAP earnings per fully diluted share for the fourth quarter increased 5% to $3.84, compared with $3.67 last year. Foreign exchange headwinds lowered our non-GAAP EPS growth by 8%. On a GAAP basis, our earnings for fully diluted share was $3.81. For the full-year, our non-GAAP earnings per fully diluted share increased 7% to $12.02, versus $11.20 in the prior year. The foreign exchange headwind lowered our non-GAAP EPS growth by 9%. On a GAAP basis, full-year earnings per share was $11.73. Turning to free cash flow, capital deployment, and our balance sheet, we define free cash flow as cash from operations, less capital expenditures, and excludes special items.

In the fourth quarter of 2022, free cash flow was 145 million after funding 62 million of capital expenditures. Excluded from this free cash flow was $8 million related to the investment in our Taunton precision chemistry operations. In the quarter, we continued to build inventory to secure supply and build safety stock, given strong instrument demand. For the full-year, free cash flow was 506 million after funding 176 million of capital expenditures and includes approximately 100 million of additional inventory versus the prior year-end. Excluded from the free cash flow, was 32 million related to the investment in our Taunton precision chemistry operations and a 38 million tax reform payment. We maintain a strong balance sheet, access to liquidity, and a well-structured debt maturity profile.

This trend allows us the ability to prioritize investing in growth, including M&A, which will meaningfully accelerate value creation in well thought out attractive adjacent markets. In Q4, we repurchased approximately 475,000 shares of our common stock for 149 million. At the end of the quarter, our net debt position was approximately 1.1 billion with a net debt-to-EBITDA ratio of about 1.1. Now, as we look towards the year ahead, I would like to provide you with our thoughts for 2023. We have seen strong performance throughout 20 22, driven by robust end market demand, excellent commercial execution across our geographies, and new product introductions driving growth. As we enter 2023, we expect our sales momentum to remain solid in our durable end markets and that our refreshed portfolio and growth initiatives will continue to enhance our performance.

These dynamic support of full-year 20 23 guidance of organic constant currency sales growth of 5% to 6.5%, excluding Wyatt. At current rates, negative currency translation is expected to subtract approximately 1 percentage point resulting in full-year reported organic sales growth guidance of 4% to 5.5%. We expect the Wyatt transaction to close in the second quarter of 2023, and depending on the timing, we expect it to add approximately 2% to 3% to our full-year 2023 revenue growth. Therefore, our total reported sales growth guidance is 6% to 8.5% versus 2022, including Wyatt. For the full-year 2023, organic gross margin is expected to be approximately 58% and organic operating margin is expected to be approximately 30%. Before FX, this includes 20 basis points to 30 basis points of net margin expansion after 70 basis points to 80 basis points of investment in high growth adjacencies.

FX is expected to be a headwind of 50 basis points, particularly in the first half of the year. The addition of Wyatt in Q2 is expected to be accretive to our full-year 2023 adjusted operating margin by 20 basis points to 30 basis points. Excluding the transaction, we expect our full-year net interest expense to be approximately 42 million. The transaction is expected to add 27 million to 43 million of additional interest expense, depending on the timing of the close. The full-year tax rate is expected to remain at approximately 15.5%. Since we will be temporarily suspending our share repurchase program for the remainder of the year and using free cash flow to pay down debt, our average diluted 2023 share count is expected to be approximately 59.5 million.

Rolling all this together, on a non-GAAP basis, our full-year 2023 earnings for fully diluted share guidance, excluding the transaction is projected in the range of $12.70 to $12.90. This represents 6% to 7% growth versus last year and includes a negative currency impact of approximately 3 percentage points at current FX rates. The Wyatt transaction is expected to be accretive to EPS, as early as in the first quarter of 2024. And this is even net of our share buyback suspension for the remainder of 2023. Overall, we expect it to deliver a high single digit plus adjusted return on invested capital, net of tax by year five. Due to interest expense incurred on higher debt balance, and the suspension of share repurchase program this year, the transaction is expected to result in a 2023 EPS headwind of approximately $0.15.

Hence, including Wyatt, non-GAAP full-year 2023 earnings per fully diluted share is projected in the range of $12.55 to $12.75. Looking to the first quarter of 2023, we expect constant currency sales growth to be 4% to 6%, which is 10% to 11% on a two-year stacked growth. At today’s rates, currency translation is expected to subtract approximately 4 percentage points resulting in first quarter reported sales growth guidance of flat to 2%. First quarter non-GAAP earnings per fully diluted share are estimated to be in the range of $2.55 to $2.65 with a negative currency impact of approximately 6 percentage points. Now, I would like to turn it back to Udit for some summary comments. Udit?

Udit Batra: Thank you, Amol, as I outlined at the beginning of our transformation journey and later at our Investor Day last year, our first focus was to regain our commercial momentum and strengthen our organization with new leadership capabilities. As you have observed over the last 2.5 years, we have delivered incredible results with consistently strong execution, and we have assembled an amazing leadership team that brings with it a proven track record in transformation, which is pivotal to driving seamless integration. Our second focus was to revitalize our portfolio. The success of our new product launches, the increased vitality index of our portfolio, and the rich pipeline ahead of us underscores our accomplishments this year.

Today, we’re entering our next phase, which is to accelerate value creation for our customers and shareholders by adding a fantastic fast growing technology platform. And increasing our capabilities to address high growth adjacent markets. So, with that, I’ll turn the call back over to Caspar.

Caspar Tudor: Thank you, Udit. That concludes our formal comments and we are now ready to open the phone lines for questions.

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Q&A Session

Operator: The first question is coming from Luke Sergott of Barclays. Your line is open.

Luke Sergott: Hi guys. Thanks for the question here. So, I guess, before we get into Wyatt, can you kind of give us a sense on continued instrument strength you guys hear it a lot? Your visibility here, how the backlog built, mass back up over 30%, that’s from the strength in the business building here the last six months. Any kind of color here we can get going forward on that €“ on the new instrument launches there in the revitalization?

Udit Batra: Sure. Sure, Luke. Thank you for the question. So, instrument growth in the quarter, again, finished with double-digit instrument growth. For the year, it’s 16%. And it’s really across the board, right? For the full-year, you see mass spec well into the , TA in the high-teens, LC also in the double-digit range. And this is largely due to the success of our commercial initiatives, which were around instrument replacement and really focusing on our new product launches. And there you’ve seen a complete revitalization of the portfolio, especially on the mass spec side, where we’ve gained traction in biologics application with the Xevo G3 with the BioAccord more recently with the cyclic and absolute for food and environmental applications .

On the LC side, same thing with Arc HPLC and ACQUITY Premier. So, you see very strong new products coming through, which are gaining traction. Now, as we look ahead, I mean, orders are as strong as ever. We see a very, very healthy backlog going into the year. And as we look forward, the end markets are still very robust, right. So, we don’t expect €“ and across the board, they are pretty robust, in industrial pharma itself, as well as academic with additional funding, but as we look ahead, I would caution against using the 16% and extrapolating. I think we’ve been saying this for a while, these are incredible growth numbers. On a stacked basis, you’re looking at double-digit growth for instruments, but we cannot expect the instrument growth to continue at a double-digit level.

I mean the long-term average is around 3% to 4%. And if I were to just dig into the guide a little bit, when we say 5% to 6.5%, so the 5% €“ if you just take the higher-end and then make it consistent, let’s say, with the recurring revenues and the lower-end consistent with the instrument growth in the future, long-term averages for instrument growth are between 3% and 4%. Add 100 basis points of additional commercial execution and another 100 basis points for pricing, and there you have the 5%-ish instrument growth. So, we think it €“ long term, we should be seeing healthy instrument growth. And I’ve heard several comments which say, €˜hey, you’ve seen serious significant instrument growth, will it come crashing down?’ Not at all. We don’t see any signs of that.

We do see it reverting back to, sort of long-term growth averages, and we think we will out-execute the overall market growth with our commercial initiatives, with our new products and with additional pricing.

Luke Sergott: All right. Great. Just a quick follow-up on that. Can you clarify if orders grew faster than sales? And then I’d love to dig in on Wyatt where €“ so where that fits into the overall characterization portfolio? So, you have the BioAccord on the raw materials on the upstream, where would Wyatt’s light scattering technologies, kind of fit into the overall instrument portfolio and the bioprocessing workflow?