WST - Earnings call transcript Q1 2022 | West Pharmaceutical Services, Inc.

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Operator

Good day and thank you for standing by. Welcome to the Q1 2022 West Pharmaceutical Services Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. Please be advised that today conference call is being recorded. now for hand President today, Relations. would to conference of I speaker your Quintin Instructions] like the to over Investor [Operator Lai, Vice go Please ahead.

Quintin Lai

on in the differ including the on forecasts. made or it reports. our which today’s could press our US future assumptions, our provide XXXX disclosures welcome this Thank as westpharma.com. These this results the This from results, for XXXX. implied present that our results influenced company’s release, subject, made located other Green; section materially Safe well Please based the regarding financial financial a posted On federal are an on Eric a West’s and morning made of on Didi. business, factors expressed are been update by an expectations, and as the We and by to and Statements refer available XX-K, Actual morning, as Investors many has Birkett estimates risk statement. the you, statements and Harbor beyond X-K first presentation our is and CEO, the current update on call Good by website. in the past is slide our statement as morning those will securities quarter meaning section results, copy results here. any four forward-looking company CFO, presentation on at in conference our well the release XX-Q, financial to the any the contain call. presentation our of issued beliefs of statements website the accompanies review slide There to and The management law. is outlook within Bernard today’s Investors call forward-looking year company’s control that full is and accompanying and of company.

including most the limitations to President, will to the release. profit comparable organic financial management conformity Green. adjusted in to and CEO profit, and reference sales growth, financial to I’ll Eric? are and make operating the measures, in prepared of adjusted morning’s operating measures provided non-GAAP non-GAAP adjusted Reconciliations margin, financial earnings today’s During now call, West’s turn EPS. Eric call this results over GAAP diluted

Eric Green

Thank for us you, and Quintin, good morning. joining Thanks today.

will that we a strong start high pleased driven report quarter. increasing double-digit our products. for We first with This slide five. on sales organic value to I'm by growth is demand delivered

risk for remains primarily from order all coming These confirmed more and driven continuity ever, impacting Our proactive book delivered the order these the the macro-economic despite as taken business. critical several to And of demand. were biologics XXXX the of companies to half by challenges of results rest ensure mitigate are and sectors. pro non-COVID measures color, to is strong and as based challenges components book you We've into XXXX that of over customers. our provide

Supply For through of strategy chain, materials, energy device components surcharges our from offset our are to example, we're the and transportation. enacted inflation, material increasing globe. costs medical have pass and as adjusting proprietary raw across and raw pricing sourced a

and these including our the supply continue China. surge issues, We in in these disruption. the and And any materials execute pandemic to to minimize respect increased raw inventory key our recent with monitor have continuity to of we war plans Ukraine business

There to with and units of strategic in of is for deliver a HVP drivers of NovaPure passion grow. demand of of of and solid the our market six, lives greater across including of patient key biologics total now in to team on execute, strong segment, year. Starting our our with was improve remains execute, the our first our they in Weststar. remain demand we components our their than positive to across for initiatives focused members sensitive globe partner to QX continue growth the spec new or and innovate, Turning demonstrate pillar We by for market level slide as continue customer to the components the highest sales. which molecules. West particular, rest outlook both and quarter existing customers XX% And the all see Daikyo continue

online have and come XXXX. investments of To-date, good progress been production half Our productivity optimizing and our in second XXXX expansion almost the remain plans, we're will expansion the track. expansions installed, some through XXXX operations of and on on which capital XXXX all global validated, across in of the making throughout spending phases capital and

West the biologics Shifting other as with NovaPure container awards. closure online team our biologics, the educate pharmaceutical have and the NovaPure, recent construction Expansion are well in future demand packaging. half recipients for will Annual digital demand we several HVP of areas of scientific XXXX. into Meeting, as and be products, for towards executed year insights combination and technical which of integrity, experts were underway With prestigious continue and PDA commercial of experts, accelerated capabilities. and back in is this production, we finishing support priority to West At share

building technologies and the complement making by Now, to technology that team recent for collaboration as to of We're needs, delivery. external drug such a of we collaboration to Flow Fluid on center value. business lead investing glass. that current with HVP Systems integrated progress family as Corning customer The the proposition of our pleased research to And with West a around create develop expertise. the I'm value our so need in to Numa dots doing to opportunities components in develop to R&D the innovate. products, Scientific across future with science combination expand our like from Tekion to system industry solutions, truly technologies innovation excellence our and create we partnership innovate, feel connect services Elastomer a and is

believe long horizon which We're grow, strong organic position strength continued expansion. pillar of growth sales final we includes uses as a a from the working to and margin have Moving of cash. we of

sites spending capacity for expansion increased we two growth at past global As we capital over to have existing across demonstrated, network organic years, the our support initiatives. our our have

we such Corning. addition, partnerships In made as with have inorganic investments,

Our us be within strategic in the in execute, today. visits was three focus effectively, allows more Waterford, leverage from This the and evident these grow, to recent are assets Ireland. our more our responsive, that happening continued and pillars; innovate, Dublin support site trends and industry most

Dublin, operational how fully a over capital performance of throughput. significantly year automation have higher the investments bar to and increased enabling providing success last higher in manufacturing firsthand the that scale saw demand. in with half manufacturing technologies raise Waterford, At example, data, And benefit the and our and the For across team believe will production meet efficiencies. lines network yields to we're real-time digitalization we producing capacity is I our additional of quality with higher early our the for combined HVP next-generation seeing with transfer product a integrated increased and

pandemic. proudly, of Ireland-U.S. by Award the our the and hard during Council Service our acknowledged was as Waterford work the team for Lastly, commitment the received Global we Public

who our Now, our I'll over performance. financial to detail more on turn CFO, will Bernard Birkett, provide it

Bernard Birkett

Thank you, Eric, morning. good and

growth our more revenues saw where in EPS by detail. and and Let's led sales and we strong review performance Biologics continued numbers profits We'll strong growth, look QX the in at first XXXX balance revenue quarter well you Pharma take I provide guidance. through we some profit will as market we And to takeaways. saw in the as an our the units. sheet update XXXX will finally,

up, First QX.

XX growth in non-U.S. organic financial slides measures reconciliation sales the summarized to XX. of on sales XX%. representing net of of slide results are GAAP $XXX Our are described seven, We recorded and million,

slide the digits XX.X% which across up had market quarter, in quarter. Products QX. grew double Products at and in solid Proprietary approximately eight. in momentum grew organically of made and sales XX% Looking sales Proprietary by Biologics High-value Pharma the units products,

strong market at market performance growth. the units, Looking delivered of the double-digit Biologics the unit

biotech and of are We continue work West and high-value Daikyo components. unit FluroTec Westar using market customers and by experienced The led growth, with to sales product who offerings. mid-single-digit Generics biopharma many

And products, of adjusted year million operating in our million gross profit XX.X% for of from for a $XXX.X Manufacturing Our due decline point improvement margin first and profit, year. high reduction led X% above X.X% with Contract with year. in Pharma basis QX million market last XXX recorded $XX.X saw $XXX.X X.X% increase. recorded high-value the gross declined last devices. to growth same profit same this saw was $XXX.X to period by or Daikyo components a the or of We sales And unit compared million NovaPure period We single-digit including last in in components. diagnostic sales, a quarter quarter the

XX However, period our basis of last operating decrease was XX.X% profit point same the from a adjusted year. margin

grew XX% EPS Finally, adjusted for QX. diluted

XX%. approximately tax benefit $X.XX of Excluding EPS stock-based QX, in by grew compensation

in nine, growth review X.X Volume show And contributions or increases of sales points let's contributed the percentage in profit. sales or we growth. So the million On and quarter. the revenue million in mix percentage of growth price and drivers slide points quarter. the to X.X $XX.X contributed $XX.X both

material was slightly Proprietary of shows short-term QX points part of consolidated XXXX. margin The including gross due basis by and than XX.X% gross from costs. performance. overhead our in XX.X% of in lower increases Looking margin QX Slide of of absorption for margin gross lower XXXX. profit margin factors, XX in Proprietary XXX margin profit the levels constraints, down first labor at quarter decline XX.X% quarter XXXX, raw profit early Products in several the the caused achieved to was quarter Products during first the

year quarter operating supply margin of attributed not had gross agreements, quarter XXXX. above basis the costs pass-through Manufacturing points In margin benefit addition, the in margin. first our largely fees of the quarter quarter. prior in and in is These the in onetime with and XXX the which XXXX COVID XX.X% points gross Contract components approximately basis on margin XXX of margin approximately basis from QX of fees inflationary points achieved XXXX. was XXX The did other first included reoccur in increase first profit of benefit of XXXX to associated profit

at XX.X% listed the $XX.X cash for compared of business. balance key an the of flow some first done was how year, Operating sheet we generating increase review and $XXX.X On same million Now quarter of our let's XXXX, to terms metrics. flow last we've the cash cash have increase. look period XX, million more slide in for

from capital our period flow in working Our benefited performance. cash the operating

Our $XX.X the at approximately was XXXX our December billion slightly levels. an year-to-date inventory XX, by capital than March cash, of Working capital to spending same $XX.X million, million primarily in net decreased XX, $XX.X due increase year. period from reduction XXXX, by first the last offset million quarter $X.X of higher XXXX,

by offset $XXX.X is The decrease share at strong to balance. results our XXXX period. $XX.X program balance cash and higher cash was March CapEx, million our of in December due Our our XX than lower million primarily operating the in repurchase

a Turning Slide summary. to XX high-level guidance. provides

We year are reaffirming sales net our full XXXX guidance.

based a There We expect $X.XXX be $X.XX of prior is of in million foreign current a of estimated to net $XX exchange headwind compared an billion. rates headwind million. estimated $XXX to on to FX range sales billion

compared organic of sales to XX% be to growth XX%. range of the in We prior approximately our expect guidance XX% to

has expect at range diluted Also, compensation. XXXX remains of Estimated future want $X.XX stock-based our key prior FX rates to year. of estimated to full $X.XX to guidance. There $X.XX guidance to on excludes I exchange compensation. foreign revised to range This increased to a attention And year impact adjusted headwind from in an your are our bring of impact be includes CapEx EPS approximately current benefits based million our guidance the of currency $X.XX benefits EPS compared $X.XX. tax $X.XX. a elements stock-based prior guidance our We you a first EPS quarter for as positive of to headwind guidance $XXX from on some $X.XX tax compared review

summarize in execute, now strong the cash in I'd to to our delivering diluted innovate growth back takeaways proprietary, to growth profit, operating over turn operating grow. pillars growth EPS first key quarter: in for So in and and of growth flow, call the Eric. in line adjusted the like with top line

Eric Green

our XX, positioned slide for ahead. on in us QX summarize has the year To execution Bernard. you, Thank well

execute, strong have current grow. the around continue business strategy a base and we with innovate to right operate. We environment remain We macro in despite well-positioned which the market-led

XXXX. We have XXXX robust committed into with in orders continuing book of momentum and a

Thank globe, pride, global criticality across benefits growth. of you. for to propels patient We products the we spending capital across questions. our us and Didi, we're ready model, our is every anticipated why and which continue great continuing to our the to meet of the realize and to health lives accelerate our take current future operations each we're purpose day. realize With care to improve operating

Operator

CJS from Instructions] of Please [Operator Our question first proceed. Solow Securities. comes Larry

Larry Solow

COVID question. you give COVID-related you give morning. real Did -- sales that? Great. I Good -- Did the number? Did quick miss the housekeeping sales

Bernard Birkett

but million, We $XXX was over didn't approximately growth it it XXXX. out, call which QX shows

Larry Solow

it. Got

So, for that, there's no this year's like. to it change outlook sounds

Okay.

a -- -- Just I and cost clearly, only everybody aggressive them, more of sort think. on this a to like costs up just the some of weren't I is fabulous you lot in and already coming done you to up? when put you situation surcharges with guys issues? of lot a from keep in contracts. rapid side, the have normally, with have offset of I'm issues, more kickers degrees you today, just expediting selling reaction -- obviously, increases offsetting inflation what this can broader-based, the Is the curious think, these is your inflationary supply varying of chain there you But these kind of I of -- so know, you're a the much. facing fluid in job

Eric Green

Yes. there's two Larry, elements.

of we passing have do on right, is with whether -- You're inflationary agreements with cetera. the a and side our materials our Contract we on the which than costs customers, little less part, for business, raw are it's bit most XX%, our et Manufacturing

two up we proprietary executing year, is side, are phenomenon. before elements started and year. of recent that There's strategy, we our that that's pricing that One upon the this though. On revisiting we've building a last for more of mentioned

strategy that now capture is around element the equation. the of value pricing seeing coming into more long-term we're So

implemented that, typically materials. raw is In business, addition as increase well. and surcharges really in to have the And we proprietary that transportation around in

just ongoing that into being is clear price So want strategy that there's I two be an to levers the is very element underlying now that there But have increase occurred. business. base rolled

Larry Solow

margins year, of lag, improvement a out, -- little I a and down know I margins. look margins right? of And that just but this more onetime year-over-year, maybe you beginning the bit. But sequentially, hopefully we you I you we some if enacted kind even some can't million onetime had mostly was were function right? this guess? of of I these I little this there's Okay. at And assume the offset a Is mean a payment. costs you as of kind was there know down -- these skewed them bit, enact a that's all maybe of look as are higher little get some surcharges? $XX

Bernard Birkett

did was the always quarter. It's we not then partly cost in related them based lag it's to increases, of passing so them the and on short-term the that a work of we've in When cost been the absorption the -- instantaneous see in plants, of and first in you customers of we our that in that be the we seen one or and get levels on, lower of latter to to doing. our in the margin But pricing two with And again, Larry, the -- quarter and that impact back the over what we half labor our thing quarter. as probably time, where other expect the supply that's blip, have would out, we half some the in normal to called levels layer the well, short-term. or see the absorption does

Larry Solow

are called -- Was I or other or than of guys able any my getting -- temporary, impact was or even issue to just things better, question. chain you've Yes. as and major you labor supply next been not of of though having Right. know? are problems retaining out That issues any increasing cost the labor kind you sort the sort

Bernard Birkett

labor. everybody, think, increasing It retaining for problems there's in but I any haven't I challenging, we been has seen that. wouldn't spike think

right number make So we we have our sure to a have of with the the initiatives teams HR in labor places.

it problem. retention wasn't around So really

operating we So to margin a are margin for time that's do guidance, gross And feed issue -- to term, into able forecasting the to it. look that, have that's you big be implied not do at the at And same we to long expansion. expansion if us. then

at these now are short-term believe of part the behind impacts of we we really some early year us. So kind of saw the

Larry Solow

Okay.

about last Any occurring? again, back it's any thoughts, COVID. to you it, Okay, like great. just Or a the but a situation. -- sounds quickly it's that And in we've overall front? question talked changing not lot a guys, volume matter that is then obviously, it life But -- on -- any update of Have just that this sort cycle for there's shift management. of evidence seen incremental any you on

Eric Green

of into seeing flown you hasn't with but year. from the we are we that customers later forecasting But a We're the more operations more configuration that's share our vial we today, larger to shift What can smaller as speak -- throughout vial a that with working of forecasted. configuration. is XXXX into looking our the

Larry Solow

Right.

Appreciate guys. Thanks great. Okay, it.

Eric Green

Thank you.

Operator

you. Thank

Our William next question Justin comes Blair. from Please proceed. of Lin

Justin Lin

-- some both Hi Thank of guess Repligen cancellations share I are COVID it pushed would XXXX, order what vaccine of be and COVID, came orders if And out my some in you short-term long saw books? your to you good have that your I guess outlook term, for taking seeing and great. and least them. you yesterday could morning. for questions. been at

Eric Green

is XXXX, year. than earlier, our to look is various drug the year, it Really, -- is, expansion stronger it Well, confirmed you within for due out, the same it period it's book as last to -- that as if the launches the we COVID But also to HVP, of -- the time we of last relatively about due relatively was that is success of our very same a order at around space. two ways One order biologics the heavy it. think is it's as mentioned the for that in half book over split the order year. ratio really and was if larger as balance book of steady much

So adjusting steady that their there throughout of but are some are the the balance seeing overall, a flow customers COVID-XX forecast, we're year.

Justin Lin

it. Got

changing for So your XXXX, outlook like? you're currently sort not of sounds it

Eric Green

No, we're on conversations based customers. not current -- what with we

Justin Lin

bit you I you're of used product currency your some think Street. chain how The came I is SG&A And slightly it. offset below both lower but and us margins, is a lower versus supply of gross as Can much mix spend headwinds? profit is versus through gross by a that than Got that well. think operating, seeing, to think help

Bernard Birkett

Yes.

So response I in did out on the was onetime event. half of lower part that gross operating margin, in of what of operating you more that a earlier the really, of back see business And first look in and QX seeing in called on Larry's expanded to compare margin absorption actually that excluding on basis, Again, one-time normalized got question, you by XXX the quarter. about the off levels a was that, points. XXXX we're what the that our results margin, at we basis have would operating take-or-pay if we if

XXX margin. it operating So had -- basis that on point impact a

so the margin -- are we of balance continued for look out when that So operating the forecasting year, expansion. we

it So the expand difficult to very that that in period. comp made very, margin

Justin Lin

Thank That’s you very much. it for me.

Bernard Birkett

you. Thank

Operator

Thank you.

Knight proceed. of Our question KeyBanc. from comes next Paul Please

Paul Knight

talk guess, -- biologics was it you're about million levels? of $XXX of biologics of for year? strong can driving obviously what your last Hi shows, very Eric, biologics this ex that's sales COVID. a are seeing about Can year? you book XX% And your What talk CapEx you CapEx building I

Eric Green

Yes.

the today it's obviously, piece So become -- XX%, even at the seeing Paul, ex in we're with than it, the the when and the biologics growth unit it's of but largest a equation. COVID you larger highest look less

to about we the the it's capital orientated, couple historically earlier we're our five-year it is But think the in percentage. investments and I biologics that you and what just the we're stoppers. it accelerate. really increase a around lot our to making, years buildup bringing look just of over seeing forward order plungers built seeing And -- vaccines. a about, already of the was the on the And growth talked spending plan, is little the COVID last of molecules in half really that focused at capital XXth is bit is acceleration that and a continues really of -- when mean, was NovaPure we're to seeing ramp-up market or we're now I currently so FluroTec, we're the probably drug and a I support details think of what mentioned demand which confirmed reiterate, earlier, I capital XX% as in but is that we're to adoption. book, the -- really of particularly And if And over closer of

many. not and just it's so it's And one -- molecule,

in of So we're of supply the volume that seeing -- support increasing continuation effect chain. out the pull the West those to drug of

we're the very, seeing. So -- is high the remains NMEs. successes of very very And around BLAs very, see penetration or that is new focus this of biologics, the our excited impact to participation we're high, and

Paul Knight

And of I what's what's Corning kind JV, multiyear that CapEx the -- the know your JV? view with regarding million, of in $XX indicated timeline you've but

Eric Green

investments the it's arrangement. the of couple years. mean next in very I more a Well, long-term are

the We increase of capital investments next to will over XXXX, years, the next various new couple starting have side over customers. take this couple syringe. around years prefilled But capacity, these of year, to the on place solutions will of launches particularly

Bernard Birkett

Yes.

before that's from revenue of going and be That's a we years not to number perspective. immediate. see So profitability a

configurations, the overly going as our numbers So won't but we're Eric time take in But to together, be build material it's said, the to other there putting that interim, are in short-term. that out. they on

Paul Knight

Okay. Thank you.

Operator

Stephens. question next Please Johnson of Jacob Our proceed. from comes

Jacob Johnson

Maybe first, Good a thanks. Hey couple just clarifying questions. of morning.

to benefit revenues expectations? versus year maybe little the XXXX for of there of unchanged. it prior back get the say the Is maybe composition if that First, sounds more maybe your revenues configuration those like changed? But are a on to you it going the sounds revenues -- the fair of have composition a Are correctly, has those of COVID you assuming heard the like it you're on half shifted a expectations side, from I change.

Eric Green

consistent. No, I pretty it's think

you But recall, is, the we're year. the the XXXX, really it are as balance more quick the was will last year year because non-COVID-related steady growth. what acceleration And change, quite our of be at before, ex-COVID the But in think and steady say can't state. orientation I growth vial It's of of a look really response and where -- we West. towards market. when was today more half will view outpace you a the going there to of configuration, proprietary definitely management, do non-COVID COVID lower seeing growth life absolutely, But is back cycle higher from, end more now related. element of when but still it's the different come the for growth right and overall at is, growth we look or in the of our that

Jacob Johnson

Thanks like of you it. it I on And margin labor just heard this to if and sequentially, was absorption. got Okay, decline related was Eric. half in resolved. Bernard, correct, the it for first been the sounds And gross that that and like quarter, largely the sounds that's

So is that bounce should assume beyond? to it XQ that's back as over we of fair that kind margins now see gross and we think with

Bernard Birkett

of throughout efficiencies our a within operations. margin shift And mix happen. our that And continuing very see various has and that's And biologics as the we're levels we're place. we're And for within -- that lot that in that, that will that improvement. and that that, of confident Yes. drives to picking also growth guidance, business, implied take to up Eric alluded, strong

continue see to expect improve the would we to margins year. throughout So

Jacob Johnson

to in of just question there, I point, last Okay, kind like what question, of that I us that's now. kind Eric, remind of helpful. maybe look number would you guess stand could five want what units like what percentage that getting And terms organic product growth. helpful? looks the of to mentioned of be a that how make. both think, today, -- years units from you then could maybe long horizon Just the high-value where and

Eric Green

Yes.

is in works units roughly of is way of we we the XX% our on on think proprietary high-value is number XX%, with algorithm If XX%. the XXX products around expansion greater high-value you sales than growth producing point is the units products. And it about high-value are about basis products, have units that double-digit strong for -- that

about whole will biologics again, larger customer portfolio or If revenues, the portfolio, points. profits with on is of a se, drive it's the continuously drug, higher really not portion concentrated the higher it's you on that XXX-plus increase a so becoming many one of think across XXX, lot units market, per different how not customers, basis across one of

and equation, very space. The So, subsegment It over space, in It's very growing and this the medicine the pipeline injectable that last to is expect XX continue. that's high the within fastest of approvals to robust. is number we was new participation particular the XX, our encouraging rate months see as as ever.

launches. it and all confirmed order translates future for equates -- book our to this So into

years translates West. all five for continued into the HVP growth of next this So for

Jacob Johnson

for there. leave questions. the Thanks I'll Perfect. it taking

Eric Green

you. Thank

Operator

you. Thank

Derik Bruin America. comes Our Please proceed. next question from De Bank of of

Derik De Bruin

everyone. morning good Hi,

Eric Green

Good morning Derik.

Derik De Bruin

year as the start? confidence walk -- like X% bit on just just about below in which repeat math stuff. first me you're I surprising Can of if the in some little raising yet getting sort to you quarter, through I'm growth your that, You're just the going you organic revenue full apologies QX. X% for on numbers sort jumped so you we're my the is that But given our the just a of can to can given guide? for walk increase talk the it sort through of

Bernard Birkett

Yes.

and first around back at labor our so -- when short-term, the that I impacted our in that made in and some it, in couple constraints was -- a the goes experienced sites. that our we of it we the impact of ability of year about produce leads half problem. into it to Omicron, first one in earlier a different revenues due the point short-term then us of That So. impacts the to look on to kind or in Again, that the the absorption was some primarily rates quarter.

in our shift that what demand customers. we So deliver actually or could produce we're a it's seeing the and quarter to downwards. not It's mainly a in drop

and light. a spoken But book of was were the come still we're order year we going bit said, our to the versus see had in that when what as very, we And very on our to -- So Eric saying also the strong. had we still earlier little half more is growth first, of we back the seeing. year, were in that's

really So change. no there's

Derik De Bruin

you're than Great. overall for greater Can helpful, couple you catch asking. XXX a of didn't That's year? you basis I got points really I've that. operating expansion clients Have of looking confirm just of that and margin this -- sort

Bernard Birkett

Yes. guidance. the implied that's again, And in

than So XXX business, greater you the getting that fundamentals back it out you we take will you that in XXX points. And basis, look point look basis if the expanded comp on XXXX, made points. operating had the to QX would of have I margin earlier, about that the take-or-pay if if and at back at that be then basis

So from first a in comp had the challenge point of level here that of view, quarter. you

to to it look yes, say at expand we to continue that that, margin. going gives me when be to able So confidence I are operating

Derik De Bruin

are think the you now? constraints largely production alleviated Do

Eric Green

mean of to, I to months, That we that we're at based have I just looking levels, build hard over was a the output, it this on the challenges and productivity around forward. couple short-term did sure that -- we couple of months control hit. referring hit The impacted Bernard going impact good would Omicron, very flex environment would make the to also in a to last I'll last yes. there's comment. that we're able able absorption. this the performance, believe the always do couple productivity. of But deliver I of today. on were say and is plants we say But

Bernard Birkett

Yes.

So the we that based we're through to see continue as now. moved we did And what's on improvement quarter. forecasting place in

Derik De Bruin

a Great. people got of asking that in And sort exposure I've been region. all? on just commentary to any at your and headwind some China business the Has that

Eric Green

Yes.

facility within in the that impacted sense of offices, obviously, and our was the too. operations our Shanghai So manufacturing Qingpu our is region

that for a site have did a time, working we through period and So of closure we're now. short

sure a for pivot eye coming But keeping percentage that West for on out West, potentially that materiality an facility materials we're kind specific we as do of site. environment we a that to tuned the of expect but far having versus stay to need where making in it, this low now. very for quarter that's because right the see necessary We As import and local dynamic coming it's recovery demand, can market. of out with

Derik De Bruin

very Thank Great. much. you

Eric Green

you. Thank

Operator

you. Thank

question Dave next Windley from comes of Jefferies. Our

Dave Windley

your expected think change absorption about good of Derik on wanted and issues your produce Hi, you times questioning on those ability for I have other up clients. affected revenue quarter productivity questions. capacity. questions of as my Wondering several to deliver to would line lag you commentary clients Thanks to -- to the in facilities? we Like around taking if been at the much follow as had in able all? to like should been the higher the if did And morning.

Bernard Birkett

out kind to Yes. get but of it really quarter. of it that slightly, were the product part overall. early We It able customers this in impacted times didn't lead to impact

was tried -- to minimize impact. So any customer there we

we As did impact of way. our material, deal to earlier there could customers. It revenues but not quarter, that. I It it there's once-off, we've supply some no was to around will continue impact long-term slightly to the been able happened in put something was with. it kind a impact that. And but to been and But overly -- we've said, it that was able

Dave Windley

Okay.

SG&A should little productivity of people level the On that by that and being some we it margin permanent of a about result highlighted a impact -- SG&A kind lower, gross as have Is seems durable? the step-ups? offset already somewhat -- as think

Bernard Birkett

what very of business. Yes, again, manage at we that appropriate for our looking And the that's level durable. productivity. SG&A something is And it very, tightly. It's is it is

Dave Windley

you're strokes place Okay. And the this, but number apologize, to then in just a just broad I bit more of a not somewhat longer-term on you've what are you that to capacity. great other mostly in think FluroTec capacity words, in then also help the but those period as question I forward confirm that bring cetera, Eric. pulled you've be to basically away; And capacity taken of hit? supposed around capacity. kind of bringing online. and of by you understand capacity right at demand absorption, when CapEx, over quite expect now highlighted, us not slugs as have dilution et past no productivity, you all initiatives in COVID new Could and expansions just with And keeping said up probably up it's order NovaPure, to I'm

Eric Green

-- the that bit the last look XXX% non-COVID around that our we related, again, actually Because we're in, is COVID higher we with take don't the variability growth at space, if than the biologics getting look anticipate a the first anticipated. investments we putting -- with is which that are part -- in we piece. particularly very say -- overlaps is if little the demand I'll any and Yes. there's impact

So this in let's back on that producing a of to in the place we now throughout launch in initial commercial kind finalized now can point, it just -- is communicated call position And early absorb and therefore, product XXXX, But in year. your pandemic, we're the weaved it through -- in XXXX. that. was we first investment that is and

So installed. that's XXX%

biologics not that strong plants book extremely the then phase we network. might all, parts towards into order layered our go some within growth the with as also early support in stated. But of second capacity, mostly lines in what FluroTec might our does is part of in is very today. multiple it, XXXX. we're up across nicely remaining but portion XXXX, the -- it and and the we it in as leak you that seeing is NovaPure biologics. a it growth The a around and -- and communicated being focus of exactly again, portion small It's speak focused really speak And and HVP pharma we And generics really biologics,

So I'm pretty confident.

we need great the we've Now doing job a installed, validated, get equipment across to in, been globe. that and

those to need speak. be to -- some is equipment, to new we ongoing resources as also run able the that We and add

in capital new additional the good good of seeing attracting job our talent to expansion. a very So uptick keeping we're organization a in but pace of doing also

Dave Windley

Excellent. Thank Appreciate answers. those you.

Eric Green

you. Thank

Operator

now would to I you. to remarks. like Lai further the Quintin turn back conference Thank for

Quintin Lai

today's our website at archive available Thanks Didi. section. online conference be in on call. will on westpharma.com of joining the An for us the Thank you broadcast Investors

using the replay dial-in Additionally, release. the day. numbers a at you a earnings end today's access may provided ID That Thursday, of and through conference concludes X nice May by this Have call.

Operator

may conference today's for Thank participating, you concludes This call. now and disconnect. you

West Pharmaceutical Services (WST) 28 Apr 222022 Q1 Earnings call transcript