All right, good morning, everybody. I'm Tycho Peterson from the Life Sciences, Tools, and Diagnostics team. It's my pleasure to welcome you to the 2019 J.P. Morgan Healthcare Conference. I think this is my 20th one, actually. Anyway, we're going to kick it off this morning with Waters, and for those interested in the breakout, it'll be right after in the Sussex Room. So with that, let me turn it over to Chris.
Great. Thank you very much, Tycho, and thank you for having us to J.P. Morgan once again. It's a great way to kick off the year. And I'm also joined today by Sherry Buck, our Chief Financial Officer, Rob Carson, our Senior Vice President of Corporate Development, and Bryan Brokmeier, our Head of Investor Relations. And for those of you who don't know, I'm Chris O'Connell. I'm the Chairman and CEO of Waters, and I'm delighted to give an overview of the company today. I will first point you to our cautionary statements that are available in our filings. And I would also remind everybody that as we've finished our 2018 fiscal year and not yet reported our quarterly earnings, I will gear my comments towards a broader overview of the company, especially for those of you who may be newer to the Waters story.
Let me just start where I always do with the values of the company. Waters is a very strong, values-driven company. Our 7,000 employees around the world are inspired by the legacy of Jim Waters and his charge to all of us to deliver benefit in everything we do with our customers, our employees, our shareholders, and society, and in fact, this past September, we celebrated 60 years as a company, and I was very privileged to stand on stage at Waters with 93-year-old Jim Waters himself, as well as my predecessor, Doug Berthiaume, to really recognize all the company's accomplishments, but more importantly, to look ahead to the next 60 years of performance and value creation. Today, Waters is a very well-positioned company, a very global company, high-performing and high-potential at the same time, in my view.
We serve about $13 billion worth of markets and have a little bit over $2 billion of sales. And the financial statistics of the company, many of you know well, very, very strong free cash flow, high operating margins, and an above-peer return on invested capital, which for me is the ultimate metric of our business performance. We have over 7,000 employees now all around the world. In fact, more than 70% of our revenue comes from outside the United States, and nearly 40% of our revenue from Asia alone. And so we've really followed the trend of a lot of the growth and innovation in different sectors around the world that I'll comment on today. And we continue to be proud that more than half of our employees are in the field directly serving and supporting our customers.
Our last reported period was at the September quarter, and we reported in October. And just a quick recap, through three quarters last year, we saw top-line growth of about 3%, and that really comprised a number of puts and takes of both some real strong performances, but also a few bumps in the road we had through that period. Certainly, some of the positives, to reiterate, included our consistently strong China growth, which we'd seen throughout the year at that point, as well as our pharma growth outside of India, which we saw weakness in over the course of the year. And at this point in time, after a sluggish start in the U.S., we'd seen some better performance in the U.S. in the third quarter.
On the challenge side, a couple of areas giving us some of the bigger challenges through the three-quarter period were India, as I mentioned, which had been flattish over the course of the year, owing to some macro trends, as well as Western Europe on a tough comparison from prior year and with some additional macro headwinds, and obviously, we'll have a chance to update everything in our next quarterly earnings call, but with that, we were proud each quarter to continue to deliver on our earnings per share growth, and that's really the hallmark of the operating control of a company that in a variety of top-line scenarios, we've been consistent in delivering earnings per share. I'm going to gear my comments around our consistent five-point value creation framework that should be very familiar to those of you who are familiar with Waters.
First of all, is our very strategically chosen position to be a focused player and to have a very differentiated position in markets that we believe are structurally attractive for continued growth. Second is a growth strategy that's very much driven by organic innovation, and I'll comment more on our R&D efforts in that regard. Third is what we believe an opportunity for continuous operating improvement so we can continue to balance growth, investment in the business, and strong profitability. Fourth is the judicious use of capital, which has been a long-standing hallmark of the company, and there was a lot of activity last year in capital allocation, and I'll cover some of that in my remarks today. And then finally, and most importantly to me, is a team and a culture that's performance-oriented, that's values-driven and purpose-oriented, and continues to provide the fuel for our growth going forward.
Just as a quick reminder, the overall life science tools sector is about a $13 billion market. We choose deliberately to compete in about 20% of that market. I'm sorry, the overall market's $57 billion. We compete in $13 billion of that. The specialty segments that we address, both geographically and from a product sector, are growing on average about one point faster than the overall growth of the tools market. We believe the overall tools market's growing about 4%, and the sectors in which we compete are growing at about 5%. Our technology portfolio is specialty-oriented and positioned at the sophisticated end of high-precision specialty measurement. We are unencumbered by a broad product line, which enables us to be more focused in our innovation as well as in our customer support activities.
In terms of our business mix, we have an attractive business mix from an end market standpoint, a business model mix standpoint, and a geographic standpoint. Pharma constitutes nearly 60% of our sales, and the profitability and the growth within the pharma sector is generally more favorable than other segments, and so that's a positive mix and rounded out by about 30% in the industrial categories and 13% in the third class defined by government and academia. From a business model standpoint, about half of our business is in recurring revenues of precision chemistries and service, and about half in instruments, although about 10% of the mix, which is included in the instruments bucket, is in the informatics, which does have a recurring software maintenance component.
That mix continues to trend in the direction of the recurring revenues, which provide great stability to the business as well as attractive profitability. Our geographic split is trending towards Asia. Nearly 40% of our business is in Asia, nearly 20% in China alone, and that has continued to trend in that direction over the past decade, really following some of the global growth trends that we serve. Really looking at the strategic position broadly, we think about our business in three broad buckets: life sciences, material sciences, and food sciences.
Clearly, what we believe is driving our markets is an accelerating pace of innovation across all of these sectors that are really trying to get after the underlying trends in rising access to healthcare and increased investment in healthcare on the part of just about every nation in the world, a rising population, and an increasing middle class around the world that is increasingly demanding higher quality and safer food supply and products of all kinds. We think this underlying dynamic of the pace of innovation in the world will continue to place a premium on advanced analytical measurement techniques throughout the research, development, and production processes that support these industries. Specifically, the trends that are shaping our business and our strategies relate to the continued expansion of patient access to medication, the rise of the generic drug industry, where we're very well positioned.
On the other hand, on the innovation side of biopharma, the increasing complexity of the molecular structure of the products being developed, which call for much greater specificity and sensitivity of measurement technique, rising standards, likewise, in food and materials, as well as accelerated innovation on the medical research side, as well as advancing technology and clinical diagnostics, and all these really point to some key themes that you'll see play out in our product development strategies around data security and integrity, more accessible technologies that can be used by wider ranges of users, a more systems-oriented set of workflows, and the premium is placed on scientific application expertise, which is really where Waters shines. Our corporate strategy is defined by specialty focus.
It is our vision to be recognized and perform as the world's leading specialty measurement company, and we really seek to compete in the most demanding sectors, as I've said already, and compete on the basis of that focus, on the basis of our innovation, as well as on what we believe is the industry-leading customer support in terms of application expertise and service. We operate in five end market segments in terms of how we develop our strategy. Our core business is certainly the pharmaceutical industry, where our strategy is to fortify our leadership position in LC-MS in small molecule, while also really winning in the accelerating biopharma world through our organic innovation.
From a material science standpoint, it's one of the parts of the company that most people don't focus on as much, but it's a really exciting area, again, driven by an accelerating pace of innovation in material sciences, and Waters has two really powerful brands through the Waters brand and the TA Instruments brand, and we're increasingly leveraging those two together for the benefit of our customers. On the food and environmental side, it's very much a market development game, and LC-MS is early, I believe, in its application and its adoption as a core technology, and we believe that will lead us to develop a more robust food testing business over time. Clinical diagnostics and biomedical research are smaller businesses, but we continue to focus on these areas as long-term growth areas, and in particular, biomedical research to support our pharma and our clinical businesses.
I want to say a little bit more about innovation and give a brief update on some important progress in this area. Since I came into the company a little more than three years ago, my number one focus has been to really drive the innovation engine to continue to develop and build upon the great legacy of innovation at Waters. And in fact, over that time period, we've increased our spending as a percentage of product sales by a full percentage point, and now we're spending about 9% of our product sales on R&D. We bucket our activity into three buckets: our innovation driving the core, which is really around accelerating our near-term pipeline of iterative technologies to keep us competitive. Probably the biggest move we're making is in what we call transformational engineering, which is really to redefine innovation around systems orientation.
I'll give you an example of that in a minute. But we think that this strategy is going to really take our game to the next level. And finally, we're doing a lot in advanced mass spectrometry in breakthrough innovation, really pushing the technology boundaries, and we're going to have some new technology in this space in the coming year as well. And I'd also finally note that our R&D investment is strong, but it's also highly leveraged because it's not diluted by an overly broad product portfolio. About a little less than two years ago, at our investor day in March of 2017, I talked about the initiation of a project called the BioTOF system. This is now known as the BioAccord system, and it's getting very close to coming to market.
This will be the industry's first biopharma solution enabled with what we call SmartMS, and there's a variety of features of this product that I just wanted to touch on, and in this slide here is a picture of the system. I think it's the first time we've shown a picture of the system, but as you can see, it's a very compact benchtop system that will very much be oriented at purpose-driven activity within biopharma and optimized to deliver the answers that our customers need in late-stage development and ultimately QA/QC for biopharma characterization in a format with automated setup and a very streamlined workflow that increases the speed of analysis, the uptime of the overall system, and even some very novel self-diagnostic features, which all add up to the SmartMS capability.
And of course, as the market expects from Waters, a compliance-ready system for both chromatography data and mass spec data. This product development project has really incorporated all of the key elements of what we do well in terms of separation science, highly usable mass spectrometry for a much wider range of users, industry-leading informatics, and of course, bespoke chemistries that go along with it. The development's gone very well. We are beginning to take orders already, and I will certainly provide more information in the first quarter about the official commercial launch, but we're very much ready to go with the BioAccord System. Just moving over to the other elements of the value creation model on the operating efficiency topic, a lot of people ask about our margin structure in the company.
We certainly have a very enviable profitability at Waters, and really that's a reflection of the very unique mix that we have in our product portfolio as well as in our geographic and our end market. I don't believe that our profitability is a reflection of being optimized by any stretch. Sherry, our CFO, and I spent a lot of time really thinking about the operating model and how we can continue to drive efficiencies, and we think there's a lot of opportunity. As always, we will balance the needs for growth, investment in the business, as well as the continued profitability.
Speaking of that, the 10-year track record has shown a consistent performance of solid mid-single digit plus revenue growth, slightly better operating income growth with some modest operating leverage, and then the benefit of our ongoing share buyback program to give earnings accretion in a reliable, sustainable manner, and we'll continue to strive for these types of numbers over time. From the standpoint of operating leverage, we have gradually increased our operating margin over the last five and 10 years, and really that's a variety of a number of different initiatives. Certainly, the business mix, as I mentioned, has evolved towards some of our more profitable lines. Certainly, when we get mid-single digit plus growth, we can leverage that growth through the efficiencies of the organization.
But we also have initiated a robust, comprehensive operating improvement process within the company that continues to gain traction and provide us with confidence for ongoing efficiencies. And of course, good old-fashioned disciplined expense management, something the company has always done well. From a capital allocation standpoint, it's actually interesting, Tycho. A year ago, we stood here and it was breaking news for U.S. tax reform, and I said right here at the J.P. Morgan conference that tax reform would be a game changer for Waters, and it certainly has been. There's been a lot of activity over the past year in the capital allocation area. Our first priority, as always, is to invest in the business. And from an R&D standpoint, that's our first priority.
Year to date, through three quarters, we had grown R&D spending by 7%, which is ahead, which is about twice the rate of revenue growth at that point in the year. Additionally, we have invested heavily in capital. We announced on the heels of tax reform the largest capital investment in the history of the company, which is a brand new precision chemistry facility for over $200 million in Taunton, Massachusetts, and we began to get our feet wet in some incremental capital allocation towards tuck-in M&A, completing the DESI acquisition from Prosolia. Of course, the second priority is to maintain a strong and flexible balance sheet, and that's exactly what tax reform did.
We did pay down nearly $1 billion worth of debt, and we announced later in the year a target net debt to EBITDA ratio of two and a half, which is, for our business with the cash flows we have, a very modest leverage, which continues to leave us with significant financial capacity to invest in growth initiatives. We did announce a new authorization, and we accelerated our share repurchase in the end of the year, as we talked about at the end of the third quarter, to $1.3 billion for the year overall as we get going on our overall return to shareholder program. And certainly, return to shareholders is an important program with our share buyback process. It's been longstanding. It's been accentuated.
We are not a dividend payer, and while we will periodically revisit that, don't have any plans on a dividend, but we think we have a lot of flexibility in that program to continue to really invest in the top set of priorities here in growing the business while returning capital to shareholders. Really, finally, just on the last point of the culture and the management at Waters, I've touched on our values and our vision as a company that really combines to give great purpose to what we do, and our purpose of really enabling our customers to enhance human health and well-being as a company is inspiring to employees. I would say the twin focus after innovation in the company, for me, is really on the people side. Waters has a tremendously dedicated and longstanding, deeply expert employee base that we continue to leverage.
We've accelerated our people development activities, including for the next generation, and we've continued to supplement our internal talent with new capabilities that are complementary to everything we're doing internally. So the people side of the business is extremely healthy and is a high priority for investment. Really, finally, on the culture and the people side, I should comment is on the governance and the board. Another key activity and focus of mine, especially since I've become Chairman, is to ensure that we have robust governance practices and to build on the strong governance practices historically. In the past two years, we've added three new directors, and now nine out of our 10 directors have either CEO or CFO experience.
In addition, I've added two new committees to the board, a finance committee to really help us work through all of these capital allocation type of issues, and we've got a lot of financial expertise to leverage in that regard. And I've also added a science and technology committee, which to me is an important component of continuing to have a touchstone for our innovation activities. We've also continued to positively evolve our compensation practices as well as our sustainability goals. In fact, we're in the process right now of a materiality assessment as a basis for setting a whole new set of 2025 sustainability goals. So I'm very pleased with, obviously, everything the management team is doing, but also what we're doing on the governance side. So really, that was a quick run-through of the five elements of the value creation model.
We'll continue to stay focused on this, and as we continue our discussion with investors in 2019, we'll focus on updates against this set of priorities, and really, as it relates to 2019, I think I speak on behalf of all Waters employees around the world that we're very, very excited about the coming year ahead. We'll give specific guidance for the year during our earnings call, which is on January 23rd, Wednesday, January 23rd, but in a very general sense, we are anticipating continuation of generally healthy end market dynamics. Of course, as we saw last year and we've seen every year, there's always puts and takes, but as I mentioned at several points during my discussion today, we do have an overall operating environment that has positive dynamics as it relates to growth and investment where our technology plays a key role.
The second key point for 2019 is really our new product cycle. I certainly talked about the BioAccord System, but we have a number of other new product launches that are getting ready for 2019. In 2018, in fact, we launched more products in 2018 than in the prior two years combined, and so getting traction on some of those new products, which are important products, will be a big part of the year, but we're really with the BioAccord System as well as some brand new technology at the very high end of mass spectrometry where we have been under a little bit of pressure in recent years. We'll do a lot to help the company going forward.
And really, in total, I feel like we're at the very front end of what is a multi-year new product innovation cycle where we're going to benefit from many of the investments we've made over the past several years. And then finally, as I talked about in the capital deployment strategy, 2019 will be really the execution of what we've laid out and began to do in 2018 to continue to create value for our shareholders. Finally, I just want to remind everybody we've mentioned it before, but we're hosting a comprehensive investor day in New York City on February 28th. So please contact our investor relations department if you're interested in attending.
But the entire management team looks forward to updating everybody on the overall market, going deep on innovation, and of course, giving everybody in the investment community an opportunity to get to know our management team in greater depth as we always try to do. So with that, I think I'm just about out on time, Tycho. I thank you again for having me and have a very happy new year, everybody, and have a great conference.