Firstly, we're sustaining our commercial momentum with another strong quarter delivering flat sales growth of 6%, showing solid business performance with minimal COVID tailwinds.
In the third quarter, our revenue grew 11% as reported and on a constant currency basis, reflecting continued strength in our pharma and industrial end markets, with balanced demand for our instruments and recurring revenue products.
This translates to a 6% stack CAGR for the quarter versus 2019 on a constant currency basis.
Year-to-date, revenue has increased 21% with a constant currency tax CAGR versus 2019 also above 6%.
Our top line growth resulted in Q3 non-GAAP adjusted earnings per share of $2.66, growing 23% year-over-year.
Year-to-date, non-GAAP adjusted earnings per share have grown 39% to $7.54.
The Water division grew 9% while DA grew by 27%.
By end market, our largest market category, pharma, grew 16%, industrial grew 9%, while academic and government declined by 11%.
Turning to academic and government which is about 10% of our business, continued strength in Europe was offset by softer performance in China and other regions.
Moving now to our sales performance by geography, on a constant currency basis, sales in the Americas grew 16%, with the U.S. growing 13%.
Sales in Europe grew 8%.
Sales in Asia grew 8%, with India over 40% and China sales were down 3%.
A shipment of approximately $12 million got delayed at an airport in the last few days of the quarter due to a third-party shipping issue and has been delivered in the first few days of the fourth quarter.
Overall, instrument sales grew 10% for the quarter, driven by robust demand, our improved commercial execution, new product contribution and instrument replacement.
Now for our recurring revenues, chemistry sales grew 13%, driven by an increase in utilization of our pharma customers, as well as strength in our industrial end markets.
On a two year stack basis, service grew 7% in constant currency for the quarter and 6% year-to-date.
Finally, TA had a great quarter, with sales up almost 30% as demand has rebounded with strong growth across all regions.
TA instrument sales have grown at 8% on a two year stack basis so far this year driven by strong demand for our thermal instruments used in the analysis of advanced materials, as well as microcalorimetry instrument demand for our pharma and academic customers.
In 2021, we expect our instrument replacement initiative to deliver over $30 million in revenue.
In 2022, we expect this to become over $40 million which means an incremental $10 million over 2021.
Our focus on commercial execution is positively impacting our service business with planned coverage rates having increased by 2% so far this year compared to the first three quarters of 2019.
In 2022, we think a further 100 basis points of expansion in service plan adoption is attainable.
Growth in e-commerce adoption also remains strong with chemistry sales through our e-commerce channels approaching roughly 30% versus the 21% we saw in 2019.
We expect this to continue reaching over 35% by the end of next year.
So far, this year, revenue from contract organizations has grown over 40% versus the comparable period in 2019.
Both Arc HPLC and Premier continue to be strong drivers with over $45 million revenue expected from these sources of this year in and separate to the replacement initiative.
In 2022, we are expecting this number to be over $60 million.
So in all, these initiatives alone should give us approximately 1% over our base business growth for 2022 which reaffirm our belief in market plus growth rates.
Resulting configuration will allow direct analysis of bulk substance not just cell culture media, while targeting over 250 cell culture media analytics.
As Udit outlined, we recorded net sales of $659 million [Phonetic] in the third quarter, an increase of 11% in constant currency.
Reported sales growth was also 11%.
Looking at product line growth, our recurring revenue which represents the combination of chemistry and service revenue increased by 11% for the quarter, while instrument sales increased 10%.
Chemistry revenues were up 13% and service revenues were up 10%.
Gross margin for the quarter was 58.9%, as compared to 55.8% in the third quarter of 2020.
The foreign exchange benefit in the quarter was about 1%.
Moving down the P&L, operating expenses increased by approximately 17% on a constant currency basis and on a reported basis.
In the quarter, our effective operating tax rate was 11.7%, a decrease from last year due to some favorable quarter specific discrete items.
Our average share count came in at 61.9 million shares or about 400,000 less than the third quarter of last year as a result of our share repurchase program.
Our non-GAAP earnings per fully diluted share for the third quarter increased 23% to $2.66 in comparison to $2.16 last year.
On a GAAP basis, our earnings per fully diluted share increased to $2.60 compared to $2.03 last year.
In the third quarter of 2021, free cash flow was $140 million after funding $40 million of capital expenditures.
Excluded from the free cash flow was $12 million relating to investment in our Taunton precision chemistry.
Year-to-date free cash flow has increased to $488 million and at approximately $0.25 of each dollar of sales converted into free cash flow.
In the third quarter, accounts receivable DSO came in at 71 days, down five days compared to the third quarter of last year and down two days compared to the last quarter.
Inventory DIO decreased by 13 days compared to the third quarter of last year.
Given the higher sales volume and our proactive measures to secure supply, inventory increased by 62 million in comparison to the prior year.
In terms of returning capital to shareholders, we repurchased approximately 369,000 shares of our common stock for $151 million in Q3.
At the end of the quarter, our net debt position was $958 million, with net debt-to-EBITDA ratio about one.
This dynamic supports raising full year 2021 guidance to 15% to 16% constant currency sales growth.
At current exchange rates, the positive currency translation is expected to add approximately one percentage point, resulting in full year reported sales growth guidance of 16% to 17%.
Gross margin for the full year is expected to be approximately 58% to 59% and operating margin is expected to be approximately 29% to 30%.
We expect our full year net interest expense to be $34 million and full year tax rate to be 14% to 15%.
Average diluted 2021 share count is expected to be approximately $62 million.
Rolling all this together on a non-GAAP basis, full year 2021 earnings per fully diluted share are now projected in the range of $10.94 to $11.04.
Looking at the fourth quarter of 2021, we expect constant currency sales growth to be 5% to 7%.
At today's rates, currency translation is expected to subtract approximately two percentage points resulting in fourth quarter reported sales growth guidance of 3% to 5%.
Fourth quarter non-GAAP earnings per fully diluted share are estimated to be in the range $3.40 to $3.50.
Over 70 Waters employees were involved, who gave practical exposure and mentorship.
We are continuing to track 6% on a two year CAGR [Phonetic] 6% on a two year CAGR for our revenue in constant currency, showing that our core is strong.

Summary:
Our top line growth resulted in Q3 non-GAAP adjusted earnings per share of $2.66, growing 23% year-over-year.
As Udit outlined, we recorded net sales of $659 million [Phonetic] in the third quarter, an increase of 11% in constant currency.
Our non-GAAP earnings per fully diluted share for the third quarter increased 23% to $2.66 in comparison to $2.16 last year.
On a GAAP basis, our earnings per fully diluted share increased to $2.60 compared to $2.03 last year.
This dynamic supports raising full year 2021 guidance to 15% to 16% constant currency sales growth.
Rolling all this together on a non-GAAP basis, full year 2021 earnings per fully diluted share are now projected in the range of $10.94 to $11.04.
Fourth quarter non-GAAP earnings per fully diluted share are estimated to be in the range $3.40 to $3.50.