WST - Earnings call transcript Q1 2024 | West Pharmaceutical Services, Inc.

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Operator

Good day, and thank you for standing by. Welcome to West Pharmaceutical Services First Quarter 2024 Earnings Conference Call. [Operator Instructions]

Please note that today's conference may be recorded. I will now hand the conference over to your speaker host Quintin Lai, Vice President of Investor Relations. sir. ahead, go Please

Quintin Lai

Investors Good our Call. welcome copy results We release morning, in and Olivia. located company's Quarter westpharma.com. at this West's XXXX the This the a posted financial the full been a year Conference financial results, our issued will that has on morning, on you, call the for update to of that website business and today's review There available outlook Investors and is we First slide morning section is provide an Thank present presentation our accompanies financial an website. on updated of section presentation XXXX. and the our

as the disclosures control results is company which Please On well in based as the statements could made results harbor forward-looking current are as influenced from X-K management U.S. accompanying within results the or The our past expressed the is press those it other the including Statements many risks as reports. forward-looking and Actual the today's release meaning in beyond beliefs to future XX-Q securities our statement. expectations, subject, statement are presentation safe statements any Slide and estimates law. These forecasts. factors made any company. refer of made contain differ here. XX-K, on by X assumptions, materially by and federal of on to and well this regarding implied our by call company's

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

Eric Green

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

I'd where few on like topics. to cover Slide We X, will start a

will review performance. QX we First,

as will XXXX our an markets initiatives. Second, third, update well And financial updates on on year serve as our provide outlook. we the growth full will an provide update to that we we

the Now results. a the to financial solid We year. to start turning delivered

in NovaPure, HVP we as HVP quarter, again and top-tier our our component, SmartDose. devices saw the growth such During

also pre-pandemic deliveries are order in customer or by favorable levels. see had the to We continued closer of destocking inventory larger due start inventory to a said, our that customers fulfilled down management quarter. With mature their working that solid QX to timing

are are destocking I and inflection customer to levels, want with expect of Several to have you asking, QX. address through typical their patterns an order answer return an in guidance. not second to QX we maintain still full we is impact order in still of and from destocking? seeing a to The trends customers the year our stronger solid XXXX stock many short half net safety yet. question that a are after Therefore, a indicate working customer we continue sales more quarter, quite

X. Slide to Turning

positions to capacity year We expansion customers potential manufacturing our the to to response products of from wider. manufacturing capacity, changes. of contract that this well have sterilization network. [ projects for increased proprietary favorably We bring such continue HVP we and Proprietary of of washing, projects West as segment, global and Jersey throughout our several and launched legacy combination higher sites, a ] anticipated HVP be from a Kinston, conversions an expansion manufacturing and increasing components In of volume are legacy provide Waterford to regulatory our quality growing drugs, growth or processing, projects envision meet from as to growing demand in will believe Ash HVP address of especially capital to standardization Shore, levels recently global These higher active launched Products for have demand that level drugs both components our segments. in as

Last quarter, Union we mentioned one such XX. GMP was the regulatory change European and

at both from our drug systems. that Annex this topic to products of making customer progress Westar quality, is HVP emphasize NovaPure. as and HVP and to and of with timing devices in for SmartDose, expansion Earlier York, in Also, we calls and from Xwas month leading with vary key of conference a highlighted stabilized customers as in an of of customer SelfDose will interest adoption, Select to level innovative drug. segment, seeing Proprietary the particulate capacity X New and discussion are more acceleration INTERPHEX our Annex including lower from we're approach continue solutions. the customers We QX What admin Products we and higher

term, capacity through the the near incorporates to layer we're for term, in are adding that optimization productivity For to we And working capacity longer complement our processes. programs. manual automation

out at are to site build with for expansion Grand for demand diabetes certain at significant expansions experience customer's manufacturing, with in Rapids Dublin critical capacity both contract are of our facility, our overall With growing that obesity. volume device growth to support our and continue continue These platform. to components which and the our associated drugs we injection we

outlook our X%. maintaining XXXX Slide to year full to X% organic growth Shifting of X. We're sales

through our Our customers' inventory actively engaged working are teams in management.

and gross the second improved of stronger in QX half with with be expect year, growth operating the quarter. strongest the along projected margins We to

just new general initiatives, cost while For growth reinvesting are maintaining core the year, I discipline full have as we outlined. into

Now turn I'd the Bernard? over to like call to Bernard.

Bernard Birkett

Thank you, good Eric, morning. and

where first revenues decrease look the decline a drivers organic some XXXX, given to we low the guidance. update you well And sales of sheet sales, take quarter at takeaways. will I EPS current compared the single-digit market finally, will to We'll quarter XXXX and the provide review and margin XXXX and as in in saw diluted operating profit Let's as dynamics. numbers the in balance through impacting our in detail. we an the more profits, as expected, first QX

QX. up, First

an Slide X%. reconciliation GAAP are the decline are million, organic sales sales in XX. results measures non-U.S. We of and XX net of financial described of representing recorded Slides X, to summarized $XXX.X Our on

at Looking decreased product products, components. low due proprietary sales Products quarter. which primarily decreased in in from of declined our X% Proprietary single made Slide digits High-value sales the the products by Westar to organic sales up quarter net XX% and FluroTec X.

high while decreased generics Westar at NovaPure. market due market from sales Looking sales low saw primarily decline, units, delivered by market the unit growth, unit of The components and in our due declined components. double sales and Biologics of FluroTec performance the to led the market unit a a the to reduction primarily standard of primarily single-digit single-digit pharma digits, Envision

associated Our segment net quarter by with sales low first Contract sales experienced diagnostic primarily driven in devices. Manufacturing single-digit the growth increase of an components in

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

Finally, QX. adjusted for declined diluted EPS XX.X%

tax decreased XX%. benefit, EPS Excluding approximately by compensation stock-based

revenue contributed than by review both tailwind period. due price the the Sales quarter a our in X.X of profit Slide as did to of we let's million, and $XX.X in foreign percentage customer the million was On drivers in impact Now XX, the points contribution price sales volume a volume the quarter. lower and negative primarily approximately offsetting caused $X.X showed million. sales management of $XX.X performance. mix inventory currency in decisions a More increases organic decline to growth

XXXX. with gross gross XX% XX.X% of XXXX, unfavorable points XX products offset achieved and labor Looking profit margin decline in the at and quarter of was was Slide sold, primarily partially offset the shows from first Manufacturing XX due profit first The down basis of costs products prices. XXX volume drivers sold, for QX Products below to margin XXXX. profit in lower consolidated margin an of sales our margin mix Products quarter gross achieved increased than of XX.X% of QX basis unfavorable margin Contract Proprietary points sales first inflationary in profit of of the prices. by margin lower XX% gross performance. Proprietary quarter mix the by sales the margin an in first quarter partially key XXXX, increased

some $XX.X sheet balance done for business. how X ended last $XXX.X a a compared cash and primarily was flow generating XX.X% terms for due of months decrease decrease review million Operating to listed period year, to million Now same we've Slide March the cash of metrics. at On a let's have key in XXXX, look the we XX, results. our decline cash the flow operating in

was last Our same million, first capital $X.X year-to-date $XX.X million quarter XXXX the spending year. than higher period

and/or decreased to by cash capital products We a continue balance. $XXX.X March XX, primarily CapEx capacity. Working $X.XX XXXX reduction XX, billion XXXX, million of both to contract high-value on increase our December manufacturing due our to at our in leverage approximately

XXXX balance. operations. due million decrease repurchases expenditures XX, was is March Our and/or $XXX.X lower million, cash million by than share December was XXXX to cash $XXX.X our from cash at offset primarily in $XXX of capital balance The

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

We year is in are approximately billion year million based $X reaffirming range billion. XXXX estimated our net sales current headwind There on exchange full of an XXXX the of $X.XXX to $X full foreign guidance rates.

to growth approximately X% to sales unchanged guidance. prior organic from be expect We X%,

as compared range guidance. We includes is compensation. $X.XX. be foreign to There benefits some first $X.XX $X.XX, based stock-based review $XXX are adjusted our current from elements guidance our want to of from includes are of year guidance $X.XX. in guidance estimated of on an year, from to to EPS exchange unchanged diluted a $X.XX Full $X.XX XXXX rate, range an I of range adjusted prior million XXXX your to a the prior currency Also, to also increase you attention for raising XXXX our $X.XX of associated headwind CapEx guidance EPS of with EPS prior bring the diluted quarter full updated approximately guidance year tax guidance. The FX which key

over excludes would stock-based guidance benefits compensation. Eric. future to from I call back now to Our turn tax the like

Eric Green

is base make QX as XX, forward on summarize meeting care momentum financial performance Thank positive a growth the the To through Olivia, impact execution across as our strong business continues year, proven steadfast to anticipated building of our reaffirm Bernard. on globe. take product and look for you. you, to value move Thank our and this the in customers. strategy, we ready we questions. expectations on high-quality We health in to the unique growth the Slide we're team offerings and solid

Operator

the Matthew Blair. line from Our of coming Instructions] Larew first William with question [Operator

Matthew Larew

flip ask comments, hasn't the second destocking. about in to wanted sort the your on of quarter. a an it referenced you And the but in year, like there Eric, the you inflection call, back sounds discussed about growth Last I quarter. the in half pickup of been positive more second to the --

still are the quarter or weighted second we the growth just should things back thinking So if to the be half if of in more positive organic wondering year? about now

Eric Green

What were be we're the this go question. year. the see seeing is want for to demand consider of sites and in see add as will sequential that able Matt, to than through in any also QX over you Bernard, year our we fulfill that of manufacturing build [ stronger We will next the the as X but QX. timing did the the QX QX do thanks I throughout half would first we in quarter-over-quarter ] But first this QX half buildup sequentially we some be year. that into quarters. more?

Bernard Birkett

Yes.

as is an QX between be it timing There QX. sequentially, and Just Matt, of Eric up. said, will element

So have earmarked shipped QX. that in out originally, QX, we would some those in orders we of

into continue seeing also destocking we're the and So QX. that, we're seeing

Matthew Larew

very that them Okay. the where an Then have customers pandemic disruptions didn't higher West me for to near perhaps times longer go into and get which they from level, lead before. chain created opportunity some term the maybe have supply described peers to to that access let is during a

what kind more just so forward light And sole source of of that the moving curious or and industry's just positioning your multisource you're your bias in ask competitive adding. generally, the of is all arrangements assessment towards perhaps capacity high-value and

Eric Green

and were we stockout to actually particular wasn't over Yes, that any make our continue any to with Matt, worked supply customer. sure the able we with there pandemic, customers that to

marketplace. it period pandemic are stock safety really their we been the is reducing of and time. to and that the So increasing working we way The we have the XXXX XXXX. the backlog were in continue that molecules -- back through be And of see successful on we on end in levels

is We as are be future continue they their number supply and of for to being shipments injections working it the are that to products to able -- adjust schedules those them in on with being market, based administered. scripts

as this is or last going it's also win into as ever if But more at we our importantly look is current participation been. and strong it year, year rate rates

So our remain interactions with very strong. our customers

multiple what very is sole to source can position that that And issue customers gained We marketplace. support have potential in that strong around we is a have product their the marketplace. have in the able confidence the be sites

dependent not their and provide global product, we're they're in to support sites So multiple site them on with to able a sense, supply able a to chain. that single particular be

Operator

from And with coming our question Johnson the Jacob line next Stephens. of

Jacob Johnson

of just look similar the I down on kind and were EBIT sequentially, Maybe a quarter, amount. at if revenue they

the margin And the kind of margins I just But see why probably the little maybe relates side of a about you mix. in things greater so quarter. the little bit maybe talk decremental more a and revenue didn't a as given to few there's can were here. pieces know capacity outperformance moving on bit additions it leverage we

Bernard Birkett

impacted and overall that we impacted but ahead where primarily so it regional -- was QX, we performance for actually saw was ] that's of by the in in have It margin be, Yes. to absorption in mix our some us quarter. and solid was plants gross the margin, it then a predicted the which around of it's [

Jacob Johnson

if the you those ] have maybe And A for Bernard. trends updated your X. all both either years thinking question. couple come I'm change curious to Annex Thanks and Since of of Got think kind to forefront. [ X then your LRP if medium-term X or a outlook? your you ago, long-term emerged GLP-Xs or just about it, then, it. of longer-term to or

Eric Green

at do want we not say, this long-term our Jacob, point, Eric. would outlook. adjust to I this is

and now integrity the with think of successful specifications all X. the The from the our you requirements transition the how portfolio all trends to our the well customers customers suite we our documentation think are we've make that in manufacturing but customers design, we way both both with in delivery the our is container areas right ready X, our and about you them if their seeing, basis. we're support discussions Annex closure the support in they However, customers which described. also in One And about GLP-X the sector, side, ongoing about working good that would we -- with excited able you are that contract elastomer really where on about positioned way aligns Annex component whole to and in are the the services. the on manufacturing be feel as for that be -- our and to we

could positioned and So while while areas, we're both take very well can and change in it timing adoption is time. time take about

we So range. don't organization, construct we that are say the a long-term -- we ceiling. outlook But as would have an is a

I'll that. it So like leave

Operator

of And our line from the Knight question coming Paul next KeyBanc. with

Paul Knight

there seems manufacturing numbers, As delivery would right build that it be ceiling to proprietary right need for you you systems and the I fair contract and within to capacity there at say be look now? a to

Eric Green

in both pronounced will will probably and as Rapids observed this most but investments more right on ] have XXXX now, forward. going manufacturing. Yes, in characterize Paul. revenues that Dublin, such Grand will I validation would -- contract be in later do -- going yes, significant That's year, [ occur be commercial We

And then devices, that's capacity, have there we the that high-value in are constraints layered due product some in speak. being to as proprietary we but

stronger this throughout the So timing the you'll even year. later on throughput year, see as

Paul Knight

a is weakest, make that fair to it -- Is weakest? in standard standard if what's packaging the packaging, standard guess, the I leaves, Which assumption? is? And that

Eric Green

Well, that. if let -- rephrase I me

around this us, experienced I components earlier of that HVP category. think the most year destocking is the that for we've

part -- of the portfolio throughout nicely quite the will particular that very However, year. up ramp sequentially

elastomer but towards most the that. QX, if side, end at strong at of and destocking really very year to the -- you it outlook in look due strong beyond is the it point this proprietary very is time -- the So of obviously the

Bernard Birkett

Yes.

I space. in the grow. major the HVP to still important anticipate and think, NovaPure. the any we biologics in on Paul, in that by to shift. there note the And could driven don't it's around QX, that, growth growth mix even you continued that opportunities growth see And There's

you and at around HVP, in packaging whole trajectory drivers. are is the that look think I So from look we it perspective, growing past the potential they same and out the the our areas are mix XX as growth components and when growth standard

Operator

Raskin next coming Bank of our Michael with America. And line question [ ] from the of

Unknown Analyst

more I I of you just couple bit progression want a cadence little mean talked margin on revenues and have a the quick the One, focus follow-ups. year. about side I through of things. the the of to

on timing margins from margin on and as fair think your it of comments follow-up. well. I a say of I've will second and that the revenues it more bit operating products given will as to gross closer to little for in to the that XQ we quarter? bit subdued Is jump proprietary be on looked then on XQ the be a a margin XQ, XQ, first a more well quarter little And got previously

Bernard Birkett

and move improvement the spoke up margins it see margin operating quarter-over-quarter. would in that changed hasn't growth sequentially we since about expect as we February, year, step We through we in

Unknown Analyst

right. And you outright? Price Is been half of on you in that talked little price All expect be quarter. contribution just had weaker versus we go mix than year? some the about? as have was Or a Okay. is a the should to level then Or volume the expected. mix and of through bigger price component destocking the of a bit we of contributor that

Eric Green

net on any think shift. due mix X% year inflationary year, question. a the to it's price contribution, in that was I discussed situation great February pressures. targeting last we're between No, HVP of This mean I X% Yes. corridor absent a to we unique

to with expect the year started line X% in what we X%. we so And off

Operator

line coming Deutsche with of Bowers our from And the Justin Bank. next question

Justin Bowers

what your in about means of returning you [ patterns? ] typical of when to ring sense this customers normalizes and earlier some safety terms have stock levels. rebrand And that Do you talked Eric, year? a it

Eric Green

And QX some mentioned return so as year, the you obviously, and the look at that the know, order we're QX. half and we're patterns seeing we some as of we're we're in -- into second still we we're seeing prepared to remarks -- as as that destocking I in we speak. of -- But in occurring make seeing And orders. the

of a look ahead you out purview been get -- COVID. you if it of years, number us, we in normalize if we for So has quarters than stronger have it multiple is a

So -- on the we talk feel about very quarters, several we good for good about we patterns sequential today. feel next the we're seeing currently growth the when the based order on revenue

Justin Bowers

those quarter, Last operational through? Arizona. I is those side. you somewhat you about levels and manufacturing can Or changes? a improvements, Contract gating until talked maybe implement some you're you same that making the the of in productivity think, get maintain while throughput But factor

Eric Green

-- there -- have most will our product been of within devices guess, we It's but -- of some, are we There as piece are to improvements, be overall this high-value I as smaller a make portfolio. those we continue constraints business. manufacture, these our It's as being some resolved speak. are

Bernard Birkett

we sequential we And in actually working we're that a productivity current I throughput improvement production. of again, see would And now our right don't business. the would impact levels that the improvements around -- think on

step we're there. at So not back looking a

Operator

line question David our Jefferies. with of coming from the And Windley next

David Windley

to I to the moving the out absorption high it understand Just overall let I ought contributors was and you like further. reasonably I trying identified NovaPure, that have really, going But in, from high. if we've you was just you to that back to I other question going to guess, sounds the original the know from I and question, decremental strong, there. and come call to as have so really revenue that. hope being are contribution then us say rescue impacts the margin about confuse But the lower mix. be don't destocked. you. parts you Jacob's margin And some understand margin need come situation was us But I

little a how moving that wanted we possibly? parts And balance I plea there. more see so maybe then year, through improvement understand the the the make you a granularity, guess And progresses for bit so of I sequential to could the as

Bernard Birkett

Yes, David.

year, our some we products, the when as again business in saw areas we where to around progress we that's it about on do the it across where QX. destocking was the step other what the that high-value in expect So increase we're year some in was see of through really of back different to But business. all And sequentially. of we earlier volumes seeing talked the parts

through year. would margin expect throughput move or accelerate get growth year margins. we'll reflected pickup as HVP And incremental and our then also, that move the we the of and the we to that to as be we through So in the increased

was we're QX think lowest I high-volume level of business. a our and throughput,

does get So absorption impacted.

David Windley

a you one to to market rate-limiting responded in example, of how device supply example NovaPure products capacity need be It's at efforts you visibility the patterns. You that different to. so you those and calculus to that follow-up, anticipate the around investing add these for injection or demand could add that are do previous where Like an areas chain outs you you you get the challenged, higher and up that? bring you of those multifactorial of the you're degree of ultimately are elements step being As also relative with To areas that to call to capacity invest X investing. order least GLP-Xs and different what aggressively of is fill-finish being dialogue apparent capacity to sponsors very all understand? with many have do clients a but to capacity, increasingly the able

Eric Green

that not but with relationships in of. very to customers strong, are have very we had be is space. do observation just downstream We good aware that Yes, this David, that's a upstream, long-term

to about established, those their relations of conversation with do where type interact well various are them the very demand profiles we max So drugs. into

our -- of don't those a to look But chain into it volumes your we way is speak be at customer. with in and work to the else sensitive to we're so with if market, towards we get -- somewhere to aware there's these that. bottlenecks the value so customers any understanding. to to of try of had question, And the that products Obviously, we

to the bottleneck. is role sure that make Our aren't we

business, And lot fungible. assets think the the those so of of as are a you about elastomer side

So exclusive. these are not lines

So if we're have facilities to in product to we more high-value can than site. make a able product our one and high-value multiple plunger, improve customers that do

different, it When it contract space. to comes is is and that's installed that capacity And a there's a that manufacturing, one little suppliers theoretical maximum in it. to many of

model is that That's multiple So business a a different. or tailored customers. very for customer

that's So this, tackling how we are Dave.

we So -- the we elastomer where on capacity. really about look good we at the as are feel we investments, our with side,

have been expanding We capacity.

we're site. manufacturing a good on contract in very position the So

when and additional X ramp will -- up if within and We years. we out, peak expand volumes awarded production contracts, will to build X or

So model that's of that we pretty the today. have typical

David Windley

one sneak If just helpful. in. could last the very That's I

is that? wane impact to destock, the into comment or the but possible is and customer you ] in expect peak inventory the to as on it to XQ, -- continue XQ, that the through year. Can [ quantify wane still On continue you of size comment or you management

Eric Green

we next by And throughout quarter-over-quarter say, sequential the growth quarters. through it Yes, will will had talked confirmed going year. orders think as of our as wane it we the X and XXXX balance the about -- I the throughout discussion Well, for that's supported also you to is about wane.

Operator

Solow CJS of the question Securities. with Larry next coming from Our line

Lawrence Solow

-- Just a know I Annex few just whatnot. X and the follow-ups. you any update? mentioned guess I on

that you conversions speak that to going Just products Anything you any to qualitative on can conversations of with legacy speak on could just potential forward? there? thoughts customers

Eric Green

we're question. active discussions. was and positioned conference about clearly of regulations is Yes, attended point. customers recent kind for #X as the product in Larry, X. as build, provide Annex discussion thanks the New that able it's support our be support with a think of having been the for very that our at to to that York, be And interesting -- lot And mentioned do to I customers we've we get well the how ready of to able we

is interest comment of clear the is most coming one that will the the Now from that one I the make multinationals. indicators

I multinational simplify think this just originally firms, own the a level chains. their thinking to is but really at a European discussion clearly around supply

encouraging. And the and legacy so it's drugs. portfolio. really it's And heavy new not again, It's -- emphasis on a for that's just

give discussions So to active have that's drug probably It going positioned will but will It dialogue can the to we're well will are as then the on but much these without like that on too you that detailed, customer. I discussions depend time. act them. they as and depend transfer, they take those on

Lawrence Solow

Great. I appreciate question a that color. on R&D. And just

quarters the I around like I increased year, I looks think, year? a XX%, the of little only last XX%. think bit. R&D this jump What's QX up it know bit could was sort know outlook a little year-over-year. I but

the And of Corning, lot going a I lion's a different into? ] into R&D? of know where Is going share is of that that is but on areas? it into [ lot thoughts -- Just increase investment

Bernard Birkett

is around that building we year. systems that and pretty out. revenue, Yes, we're through money that A constant where of expect it again, Corning Larry, is as a lot market. our developing is integrated how increase percentage to of And that that we the supporting go going? partnership as R&D And and and with be

Lawrence Solow

little good you like think think you that for around little a a rate run And about is but X% quarter. increase just over the a lastly had I probably year? could Is price, move you bit, probably that also that full this -- Okay. on mentioned

Eric Green

Yes, to That's position good that's be correct. a in for us.

Operator

remarks. this the call I'll closing back And for any now time. the queue I turn no Quintin see from over Lai questions at further to

Quintin Lai

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

following presentation access may That this day. conference ID using end of Have the you by call. earnings and today's dial-in provided a numbers for nice at the Additionally, XX days replay the release. concludes the

Operator

and our participation. conclude you Thank conference for your does for today. Ladies that gentlemen,

You may now disconnect.

West Pharmaceutical Services (WST) 25 Apr 242024 Q1 Earnings call transcript