WST - Earnings call transcript Q2 2024 | West Pharmaceutical Services, Inc.

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Operator

Good morning, and welcome to West's Second Quarter 2024 Conference Call.

Our way of introduction, this is John Sweeney, the new Head of Investor Relations at West. I'm delighted to be here, and I look forward to working with all of you.

We issued our financial results earlier this morning, and the release has been posted in the Investors section on the company's website located at westpharma.com.

On the call today, we'll review our financial results provide an update on our business and present an updated financial outlook for the full year 2024. presentation presentation today's Investors is our slide copy and section a website. the of available is that call, accompanies a of There on the

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

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

I'll now turn the call over to our CEO, Eric Green.

Eric Green

discuss our for we outlook remainder for our X a examine and like remain provide I Quintin long-term Live why first, will the where financial thank years outlook of to for We topics: on many confident insight John, you, would West. Slide over West. of welcome X, the and third, the drivers partnership performance; main I Thank in strategy. start X contributions second, will on [indiscernible] QX past growth cover XXXX And and and to revised his at his

customers second destocking. are that That promising signs a by being performance. our Let's quarter had in from seeing of turning this confidence lower-than-expected with a begin we said, QX point impacted give We us continued customer trend.

of half growth year a than the return first Looking segment the ahead, year-over-year Proprietary organic fourth half quarter, be our stronger the Biologics. to in specifically second expect we with led by Products the to

to our compared recovery gradual full to year our expectations. We more XXXX guidance have reflect previous a adjusted as

disappointed are I'm I we want long-term growth reiterate strategy guidance, attractive what's While confidence to proven that in our lowering and potential. my market-led

Turning to X. Slide

the the health containment delivery are of medicines, market We leader care. of injectable in fastest-growing of which is and areas X

stronger Biologics, is We injectables. position have with an in which even fastest-growing segment the

immunology, the X%. growth, deliver to therapeutic revenue rare we years, addressing diseases including are of CAGR And have been the to construct that for demonstrating and critical achieved of most oncology, areas, our X% West organic obesity. products double-digit X Our has a financial able long-term past

X. Slide Moving to

ongoing our trajectory opportunities. address in now medium- to Our to our confidence new by is address being expansion to COVID are projects. underscored we capital drive The investments capacity long-term to made increased repurposed have

network. provide In focused manufacturing products increased addition, our standardization we higher a capacity level that combination global HVP expansion have on plans and through of of

for and Innovations Select regulatory such products leading lower are more and we This GLP-Xs interest global Westar changing solutions. quality, NovaPure. increased West Biologics, positions customer In standardized requirements, and as favorably and higher seeing particulate

allocation our capital Another focus devices, devices. for our is HBP which includes self-injection our

are of that remain half back our target for expansion patients. part of an platforms on are customers' year making and These device to a integral projects difference drug XXXX. Our combination the products the

already we dedicated ongoing our portion obesity. new state-of-the-art contribution product growth and this had in with we we the We from demand which And QX. our and components contracted lastly, producing expansion have platform the open Rapids injection device to and is A before for exciting have the facility diabetes join of support in team opportunity drugs an our site. at in our Grand I new contract few weeks capacity of manufacturing as associated customers' ago, for Dublin, to

We QX. expect completed the it by end be of to

drivers our as we us value customers, positioned growth significant and to shareholders patients for Our drive the have move promising forward.

X. of we sustainability our several by Shifting one At of June, being the to the America's responsible including most accolades, Newsweek. Slide published company the end website. on we as report Proudly, companies XXXX received named

the turn Bernard. over I'll Now to Bernard? call

Bernard Birkett

and Thank Eric, good morning. you,

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

QX. up, First

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

FluroTec to Proprietary products, Looking a declined up Daikyo in destocking Crystal the double XX. of proprietary XX% the approximately higher which sales as at Westar, sales at made Slide our customers by quarter than in products. X.X% Zenith rate product net sales decreased primarily Products decreased quarter continued and digits, organic anticipated. of due High-value

Biologics single-digit Zenith market at to lower of of a in a by low Westar decline, decline, market sales Looking due and products. units, reduction unit saw the Westar driven market the and pharma mid-single-digit a systems The primarily Daikyo experienced admin the primarily of volumes performance Crystal products.

our lower digits, double market While primarily the products. to generics of unit Westar due FluroTec and volumes declined

second declines of in greater in the half do to expect be than the we half. first revenues quarter, the XXXX revenue these Despite

sales in Our Contract components growth mid-single-digit in by devices. experienced net second associated quarter, segment Manufacturing growth of the with injection-related led sales

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

adjusted Finally, EPS declined QX. diluted XX% for

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

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

to of demand Proprietary QX and at our in Slide profit of achieved production drivers the partially by an offset mix gross was for in for of second consolidated the reduced Looking performance. decline XX second gross quarter margin products XX.X% Products margin XX.X% increased basis in volume gross margin down shows the unfavorable points key customer than quarter period QX Products due profit XXXX. lower margin from Proprietary XXX margin the profit XX% XXXX, the in the of prices. were The sold sales lower XXXX.

basis the Contract due Manufacturing XXXX margin second the achieved greater increased XX second to primarily than quarter was in quarter sales profit XX.X% points margin of gross of prices.

review results primarily last to of million $XX.X Now let's a a year in look terms offset working June operating to [indiscernible] for by X.X% our the cash period Slide balance same compared management. due done for generating XXXX, how and favorable flow capital XX, ended decrease On the we've or at the metrics. sheet business. of was decline decrease, million $XXX.X X cash months in Operating

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

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

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

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

full from $X $X.XX We to our year is net based are foreign sales rates. a to guidance of XXXX on There $X of billion. range updating an a headwind to estimated $X.XX exchange billion year prior billion current million $X.X billion full XXXX approximately of range

to expect X% X% decline growth. sales approximately our X% of and to to We X% to prior guidance organic compared

is of year year, The full a guidance diluted CapEx adjusted be guidance increase compared $X.XX in an XXXX timing $XXX our is is $XXX spend range on of additional the EPS of of to to by Also, to We updating prior to increase $X.XX expected projects. are $X.XX investments driven to from be a our range the which million. in in previous X and major the guidance of our CapEx for million initiatives growth $X.XX.

our tax adjusted review of elements also want $X.XX benefits $X.XX. to includes you a key on current guidance XXXX diluted decrease from satiated the first an and range year bring half stock-based FX with currency XXXX updated which rates, headwind prior some The includes compensation. guidance. is as are There of based EPS guidance approximately exchange Full your to from guidance of $X.XX foreign estimated attention I EPS

Our guidance excludes future tax benefits stock-based compensation. from

call to the to like Eric. now turn back would I over

Eric Green

Thank you, in the on with Bernard. leader stronger Slide summarize XX, we position To in biologics. market even an injectables are

are destocking point. our at turning promising We seeing from customers a signs is that

and great growth and by our significant future with with we'll make I'm on strategy our drivers margins pride flow, higher capital achieve our confident investing live are positive and a lives. growth market-led cash patient in We expanded impact to will with areas continue proven we that long-term and construct purpose financial

Shannon, take we're to you. ready questions. Thank

Operator

KeyBanc comes question Paul Capital Instructions] with from first of Our [Operator line the Markets. Knight

Paul Knight

it things that. could COVID? XH. XXXX one, your revenue do that, related Number et color lastly, questions. they therefore, Two you like this is kind Or and in cited it Grand specifically to than environment, drugs, new And then broader improved these if in contribute Rapids, give expansions, to cetera, and Kinston of here destocking in the is injectable on

Eric Green

because having customers them. Yes. both. of a are safety actually our of several to from destocking combination we our when we the Paul. But significantly in -- We're little bit months that several the destocking stock pandemic, a COVID of -- longer. their are times still there Thank got was we're increasing little seeing levels vaccines. The is activity Obviously, with to also bit lead discussions seeing a during you,

at service capacity customers, are that we've for we're now They and where Now down levels taking safety are to levels. the high able installed our quickly. all-time stock the respond those our

it's to their normalize products safety a So our but of customers allowing for stock both, market. in the it also combination our is

molecules been we the patient still speaking for and and is as consistent last as in The Our customers the on what belief expected. several our remains It's not demand years. occurring. market line speaking shift with we've

continue win our approvals molecule be cases, had past. better the than we in in rate not, as And good, if new to some what in

feel our this of half and areas year moving forward. to manufacturing also really good Michigan I Dublin, So contract in investments, in we that's regards X in Rapids, second online particular Ireland. will In where are in be Grand

Proprietary, yes, coming from HVP have in to plans regards And our then in we additional the in other expansions year. the end -- towards Kinston and benefits this of

Operator

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

Lawrence Solow

back you guess, to pre-COVID sounds kind inventory levels, is Welcome little like just maybe hasn't a on to even that. that of confidence John bit. of longer or this bit gives Eric, couple and changed were visibility demand they the a What that the to where just thought. right environment levels like kind of environment little -- to a lower. questions. I'm company. We maybe keep destocking moving goes long-term aren't than even It the customers or I all. with mid- Are curious at how your the

of that gives have hold what kind You sound confident pretty confidence? a you you that good on

Eric Green

little is this One back there. mean I Xx be half to indication after with beginning we discussions would the we in having curves had anticipated. that's an a the What the Larry, customers, the more bit that than return sooner by that year, in our of a pronounced of Yes, demand normalized is year. little second

persisting we As we demand we slightly seeing little QX. into QX, than the and that bit started anticipated, a we through intra-quarter less progress see

do improvements back our back where going the next to we're see quarters. mentioned, that we really gradually pre-COVID. as So customers couple to And were they And sequential are turning is over growth I of QX. in

it. above variations don't or slightly see any we any So below variations

So tells different though, or months. months us they has or a targeting, months much to. every when a customer X i.e., XX consistent what it's pretty will manage tell customer they're I speaking that algorithm we're that XX you to

destocking. as different whether small -- not through pharma X molecule next. go generics, So the stages or it's And it's in different of the also customer universal they're the from segments, biologics this of to we

Lawrence Solow

But to of And expect signals to million $XXX CapEx, that's Okay. kind of increase, $XXX look obviously, years, do bit next Is still runway there. that we me, then that in the little to over still out few a bit it an I have something your continue? little although as terms million guess, timing you you to you confidence, mentioned of certainly of the a spend this investment.

Eric Green

it that's over Bernard me good Let then start a because to Larry. turn and important. question, It's

investments stoppers able as and mean, obviously, Our recently HVP been to -- COVID new those around of assets to HVP, have pandemic, other during be particularly continue products to vaccine those now was pivot products support to focused able We're for more to we it I as our growth. HVP the speak on right customers. produce that the finishing

to and we've say, support, continuation in our participation X biologics investments extremely The additional area in of would These been specific really I really growth is layering is high. that the areas.

of curve. head the to want we So

you'll you go what Kinston, see. investments we've is these Shore, been That's the really when So more process Waterford. into Jersey on finishing making

are that the we our elastomer all we've but and the also of more very strong there are produce X which always And contract some a commercial customers. and the pipeline also, being auto-injectors end Secondly in in had drugs. are a pens for we in in on to GLP some will doing do customers angles, several that X the foothold in process and by that player in that site, and even on of development several frankly, from we at is so cases, we're significant proprietary arena continue the are billing the participating producing manufacturing, are

around the the So second it's -- is that's area GLP-Xs.

also, of standard changes is customers up third our HVP working with them regulatory future of a more area, about biologics ties the to kind these material really the bulk we're in there's which the -- that to demand more more talking And some the on curve. through moving that

our So are X those we really the areas capital. that focused

that's How the order on because will that amount this to long long-term good of question. touch Now persist? a

Bernard Birkett

X want a us major driver anticipated. where behind put that. facility, One, we've things sooner originally just in is Dublin this for capacity on than for increase on Larry, customers Yes, that in actually CapEx the our that been from awarded really, the year, they to place business the

CapEx some 'XX requirements. 'XX pulled we to of for meet we earmarked that into So that those had

the X% longer-term at look targeting we to really When revenues. we're X% of about

but So that the again, or finishing meet around that capacity, it. where growth-focused and will potentially today back levels areas based we see demand going getting demand that the pre-COVID always be -- would for we're that seeing if -- -- could predominantly CapEx our business. we HVP. increases then the how But goes particularly that's case happen, deploy it and was to that around around on if and of to more we're that very beyond capital, and If or

Lawrence Solow

Has know this multiyear changed of that that X% X% to X% sort don't the targeted revenue, And design. to it. I support begins X% if to it your rephrase. should of all of that X%, but CapEx kind outlook, Bernard, X% growth not Got certainly of sort I year, maybe does next -- -- at

Bernard Birkett

then growth focused what to X% of growth like predominantly our remains of in say, then from, as and The beyond CapEx very business. if contract getting very some we customers would very that to ability HVP but go support and where comes budget CapEx and for think around is growth it and said -- at areas I And X% the the to again, focused. and point really the specific to depends specific manufacturing, XX% XX% that's we're that, Eric this have we and But No. and go that. always adjust as we growth on level

Lawrence Solow

but 'XX? to sitting to that feel you do that here you today, no guarantee of in it. sort -- growth there's it's return X% comfortable X% can Got hard, it's And

Eric Green

that HVP biologics back I the doing yes, is about we so of is to won't be like on said to we're growth confident entire X% curve, few of customers exactly up areas the and that I construct. will be the next in but growth a over marketplace, X% with And able quarters, we're outsized to position pinpoint earlier, we get some but focused biologics, back quarter to some which GLP-Xs what's across will X% our moving X% the feel the the we work construct. portfolio, to our

Bernard Birkett

got -- drivers if X the construct the then And Larry, to Yes. you've in remember, you X think the you've got is shifts. volume price mix and within there, other

So look and between to you you've term. the construct XX% drivers. over CAGR got that XXXX that's supporting those long right, is if X construct And X over as underpinned we're where about growth, guiding that today, by the drivers back

areas that regulatory the around capacity looking plus times the required respond mix that out to then elan we the the to if number to shift, thesis, participation biologics change then over that you at able place of look be around normalization lead infrastructure at level and particularly Eric demand called high the or GLP that support And years. now of in have just support and you're be by next able growth to in customers in the

Operator

Our with of line Deutsche next Bank. Justin the comes Bowers from question

Justin Bowers

a couple that would questions. And be the just has destocking. is just other And ratio up? then changed So in how of shaping How question the of coverage terms throughout year? the the

year, seeing? mentioned And in heavier it standard think just skewing that was HVPs. the components I what that's towards still you curious versus earlier if like you're

Eric Green

second the and part, take hand... then I'll I'll

Bernard Birkett

coverage. the take I'll

Eric Green

yes, absolutely.

So questions. getting coverage for Justin, The the is ratio thanks stronger.

we're as is business. the therefore, that perspective, look factor seeing going orders X less early in is a of both And and for inter-quarter XXXX. -- the percent dollar actually profile the the and demand into increases is absolute of growth And also year nicely, part just intra that's at So aspect. ratio but that not of QX in scheduled this confirmed aspects of increase there's we out, a X on

we're the back that back February, so bit slower a And in I in we as than were year we anticipated middle part originally seeing little articulating come this of had believe.

And so and QX the guidance. changed programs to level they'll and to up exactly seeing we that that when our at feel with conclusion that's lining why are their be they hence, indication with look confirmed when very orders XXXX, is we're they out a we our to and why, we But at look when discussions feel strong customers acceptable. destocking

lying up nicely. it's So

destocking. You want to touch on

Bernard Birkett

Yes.

when Justin, as the generics. have segment So that's we we we were had where biggest the also over our on time. quarter. saw where chains. we stock pressure believe That's and And around to that, in And where safety we really customers going here through saw look at where seeing supply Biologics that's manage the COVID, destocking, really impact the their we lead that's where most that in built been in second the times

versus that's market comparing seeing now. larger a So to destocking units. why we those this right extent in our areas are to other

And what We're on but long-term beyond we operating on would a volume that in rates our margin and saw want that, gross you through when then a in seeing margin having impact think construct because impact. COVID growth gross the line mix. and of to having operating can also I potentially mix that's that with And we see margin impacting and expand is normalized impact our return that. what our we're we see play margin and

on at normalize, biologics it, an impact saying used look margin also see margins revenue see we we'd where but start from generic we're how and and do markets it those we'll the see also when from revenue a to margin rebound that get to also. and we we're looking on. that's delivering that the at we at perspective, when think I And -- that's a So we looking -- back perspective, to

Justin Bowers

of sense customers? change that X a in maybe then follow-up get your might have your terms of with you normalize? to a improved trying in Are to just quick throughput. trying they with from And where your patterns now sense levels Understood. times? lead in just Do inventory and Or ordering manage line conversation

Eric Green

Yes.

put Justin, on to during exactly the pandemic the demand We're our point. business. that was that's the unfortunately, due

XX Our call lead in processing. last now up to weeks, on did quarters the bit X the depending earlier, with longer to weeks. go XX little a And between to times sometimes of, consistency the it, several XX sometimes

that Our reordering those clearly. customers based are we're on realigning times, and seeing lead their patterns

constraints industry. they inventories, periods as time So also down, seeing built but the pandemic lead the longer and that whole the and during realigning. also the the during during across We're chain coming supply

bolus what operations. see throughout So which, frequency. of paced more effective the a also quarters, X by next large you'll pattern for that's the very I is more way, X X our or have

aligns long well be where with want really So term. it to we

Operator

Our next America. the question of of Avantika comes from line Bank with Dibaria

Unknown Analyst

This is Mike BofA. from Ryskin

I I go to touch more the getting and after earlier back mean conversations it's want X about coverage your all and on destock some -- ratio comments most customers. your where you Just because comments just with more appreciate XQ year. also we're time the But had this debate and XQ

So the and does situation conversations it the just do with evolve like seems evolve. customers

seems like to well As XQ, are in XQ and the in in guide just to little year fiscal bit of XQ a numbers. sizable in step-up to pretty it XQ a the step-up get as and there's poly for

some evolve just take not at an in destock point could the mean it why the I even risk like time. there's X still conservative that more seems this cycle? guide So more

get will the to progress So as year? love thoughts you that your I through just on

there then implied to cost And get any the has question my volume and XQ Obviously, do right EPS to what's or margins, wondering go just XQ as year? you -- on but outlook. through a to gross the XQ away. incremental margins the impact big assumed deleverage Is there It to number. second EPS that, are cuts tied throw has the I'll that with in

Bernard Birkett

Yes.

is that reasonable in are seeing customers. driven materialize. some that's around we and that's QX, the improvement that, step-up said, our for getting major we're And and within from been biologics Eric that the generic, we've the us mentioned improvement, by segments confidence see there QX. that basis denistep-up is metrics Biologics continuing we into will is what at driver seeing around of as the the point. really And sequential then we're and any QX information informs And a this guide don't way have are in customer as market, which given our what So going, that, up but actually step main that the in Eric the

to we're sure to And then have the have we cognizant the managing very to through on management pretty that our of we growth, have cost costs XXXX. to EPS, we be base in going growth. we we're be to been focused, able operationally with we've as managing tightly need back plants our expecting that to and get have resources been been is place when and as right variable we support that cost make across the capabilities One thing that

So we don't it. derail

managing we're So tightly. that pretty

have destocking extended not Other with period, I it cuts, a for little to through significant than that making sure although customers than the to cost but would we're to we're manage our is we prepared appropriate we that that, able are, any be but management longer returning bit using helps. make I we support cost that. Hopefully, we're originally would think, anticipated, also to growth to say

Operator

the & comes with from Our line of Company. William next Larew Matt question Blair

Matthew Larew

about mentioned perspective. but last destocking basis X,XXX cut quarter outlook some from a want that of just the to the XX% the from the points from in I and QX back initial fall happened X If customers. to destocking your had QX I incorporated with go to of destocking call go from exactly call, where back you what

outlook the results first and the actually you maintained themselves were Obviously, positive year. relative provided guide to you quarter for the the

left XXX guide XXX come So is left pretty X having magnitude the year about the the X, out organic X in with months of to months points is now basis -- large.

in So something that brought specifically used it customers? just of worsen big with to historically, it that group further? worsen Was the going did you've back was conversations things

terms June Was to happened there X end to customers in categories? big X changer. what of the from mid-April product Just of understand of or the or pockets trying

Bernard Birkett

we Yes, see materialize then were Matt, QX and that level we What orders to want and did progressing if start off that to through anticipated time. have Eric, you intra-quarter us the I'll of in period add. we of as would

wasn't would rate would some it there was it orders late out And have we have be. the some Just at with has expected to then impacted timing quarter customers in that moving the us.

at really balance through the practically of through we've we've to would we're as for we the then they that and there, seeing the as period through. end as July, of year weren't have that in it's was the anticipated what June some rolled of looked is And and what for orders even assess happening we And just QX, materializing coming when and still related levels destocking. QX

essentially would gone main longer originally is anticipated. So it's that driver. have And than we the

a little levels. ahead QX much in take have line in And confirmed then originally, or that place. was bit that, we had what that orders hasn't the we QX and had of pre-COVID forecast and happened between -- when hasn't we that actual looked anticipated accelerated at the filling in the would is would with way But it our coverage what for rate pretty we that

and we guide the where and when that the down in felt assessments, so the do we have cutting want and to level position cutting. right and take to the do And thing we we're be transparent where and it be the with cutting we did don't right

today. drop So is a with dealing hence, that not it's reason something significant. reality do, pretty It's why in the the we're but we to want guide the

positive is returning it's growth actually I in for the us thing think QX. in to that the good

really it's anticipated. would a have it again, And we quarter. originally pushed So strong out QX isn't as as

as well. that taken we've down So

Eric Green

seeing across ones that to believe, process. of add just segments. recovery. going and larger highlighted gradual to we recovery, that's then that the of the Thanks, some a actually Bernard I why more of in that's group of conversations, they end earlier process Yes, still to the the customers year of closer a I'll multiple getting this. similar And customer And on there's QX drivers the actually became through the more of what versus pronounced -- based in we're X

But that look construct. it's indicated our that than moving times, period little carry their as to are as And to discussions, in that the we with able And we confident we guidance the are process, the through products gave anticipated. lead they will -- QX. But look that we're forward. we we in in are on of with I where where time to more a going getting believe closer take we to very short produce we back going at these in long-term will

made So being statement a the industry. it's out -- yes, anticipated little than more work earlier we taking about Matt, this year that longer is in acute, a we very but bit clear to

Matthew Larew

Okay. I them industry bioprocessing Understood. available months, observed work the in pace at or of think competing down in may the times, incentives you or to this the next having over maybe demand for it's fully last that inventory they understand XX and wanting of there's capacity in terms not may give challenging quarter customers' appreciate to X. And have

there? now lead usually inventory part customers So to out more you in a better light times you reduce to of of managing how of normalized much understanding give those are that now you're as that, is referenced sitting conversations, understanding

half and the quarter? you back of thinking conviction you third but half the perhaps you're in where do incorporate are this when the specifically better does at of guide? year, of X kind observations, that how to back customers way understanding about the combine specifically And in give not those And you the

Eric Green

Yes, clarity with stock would talk in moving online. beginning more and long position happen the gives that and than we and during up the with the confidence we're getting Matt, conversations about going near and that we're we able mid- reason that in And those as year where meet us have they of And conviction when term. curve, algorithm ability to to the pandemic. the our safety and land growth I have of occur that's to we the well term -- that the positioned getting we're But of the to the is the based back versus want and of continues the our in do yes, our recent the expect, that to why to the which so the where they us. behind and capacity service XXXX we customers what today been and capital ahead levels we're growth expect deliver market beyond that see on feel we've we clarity accustomed of expect to that, --

making we going today we deliver. much better and firm to we're said going visibility So we and on we're are more clarity, have to be what sure delivering that

Operator

Our of the Stephens. next Johnson with question comes Jacob from line

Jacob Johnson

suggest. return incremental and think more? bit a I out seem we XQ to revenues kind to And than probably to this just I XXX just XXX margins contraction, cetera? it of Bernard And bps than Can guidance. just which the is you long-term bps back heard to like organic margin to beyond? growth of I maybe XXX the you're go in recover, pointing we would of operating mentioned talk down then of EPS apply margin of that Is something the as better Maybe about Can earlier, et would some X algo capacity as additions, greater growth to margins that could perhaps to X year. think you see decremental kind expansion.

Bernard Birkett

Yes.

operation that we're is So Jacob, what it, QX and by the going really have major seen here manufacturing where seeing we've impact. for is impacts high-volume in a driven and mix. in on volume decrease like HVP. in really that volume significant and margin a to And is

So they is and generics. the in drop biologics

when area, large getting in And we years were at beyond margin, this well amount of HVP where outsized basis XXX you or COVID getting we're look take and margin getting expansion on if we outsized expansion so a back that points. were in growth kind impact of the

now the we're reverse what of essentially, is seeing that. So

has volume start things back it to our mix again well as we construct. long-term improving we're the our see growth the when And into within a it's kind shift normalize, business. HVP that's of will where was the getting impact XX%. and what That and as And on aligns that driven type then of proprietary percent growth in our revenues. of also So saying mid-XXs be with today, HVP about

biologics would in The is margin to recover OpEx generic growth, particularly see space. when around all to So pretty line growth, gross and we're tight. with returning expect margin. in pretty It's and we that the that quickly

Jacob Johnson

things. Got it. side then on Makes sense. of maybe the bile And just

the of applications. the to and capacity talk referenced capacity during COVID Can line you for You non-COVID one, now guys about you time kind for transitioning brought on repositioning non-COVID that that demand?

think of below time. talk levels. concern, customers and brought inventory you for structural that And a COVID I during And well? shorter, on investors this who be peer lead about suggest is they could some that I think you Can I are other the that two, other day may dynamic worried guess, just and as yours are reference the be capacity X pre-pandemic going the weren't times only

Eric Green

that. take I'll Jacob,

So first repurposing all, assets, of done. on that's the

processing so to our NovaPure able HVP leverage softwares, as example, now the for the portfolio. an So like types of for SKUs we're notes other in or use the plungers, but

they're great ready assets So ready go job has the to go. done get team a to those to and

so ready we're demand respond And comes in, as to accordingly.

where below us want what regards to safety we going further molecule, telling customers stock, a chain think because economics our the you stay that our pre-pandemic down levels. drug as if in regards don't with about of of and the in down percentage to of In they -- are we product to the supply see are their where

the believe the types So speak can it's for going we we back levels. number to will customers, we to and can't SKUs it's provide, us, our based pre-pandemic be the of on with others. provide, that for I we conversations believe for provide times lead customers, the products for -- our we us, But to of

Operator

UBS. line question Leonard next Our Dan with of the from comes

Daniel Leonard

you have situation I wondering the of the downside visibility. on a in that because and And breadth discuss rather those you surprise? customers we're smaller visibility of customers, I'm asked where large it's another but your Can visibility. contact driving close are with question the if I tail have long

Eric Green

order been new so developments really the frequency lands destocking focused a the on in higher. to customers, quarter and the the is we're is very although but for the with orders -- variability more smaller that, impact about predictability The probably on less. larger but of volumes bit that's of there which think Dan, the the lower, question, the thanks we obviously, of customers. And has magnitude in the less and are are Actually, the when pipeline

So not smaller important a part portfolio sure biotech the obviously, are helps, pharma very if companies. I'm but of that our

When injectable of know that you great. think the about their innovation helps, if revenues whole pipeline I But on fluctuation and is impact the the don't as how space. the has medicine that that Dan. feeds on not our ecosystem into

Daniel Leonard

quick a And Eric. great. That's follow-up.

new that Dublin quarter. capacity opens ramp? in in fourth Dublin quarter the third the mentioned the to is important You How revenue

Eric Green

us quarters up Not full going get -- really. to reality magnitude to full is the of to with the and that utilization hard is mean ramp site few capacity. that takes I any new and team have capacity running up a work really to to it

not would for I to way that's suggest QX. major So we're are we driver a calling the me why the give guidance to

Operator

Jefferies. Our next David line the question of comes from Windley with

David Windley

less maybe you and talked volatile, I'm try question of kind large do have I XX% customers thought and or few on that going about June is Eric, way. your your different are them, high you more that. we from higher. there, the to to said customers them little because commented connectivity when you volume a you the where with smaller much with Dan's to then you comes visibility a a that ask of of the revenue in together, were in

forecasting but actually said your was the really around accurate those large said are the you destock. you that that source then those accuracy time, of thought customers or also I just visibility over your

so And those but accuracy think wanted a that disconnect to historical right I tie the now. seemingly with I on sure way understood that customers, the right in large to Is make and about it?

Eric Green

thanks have when question, the to that order, so we movement is a about the when is I they a -- firming that larger there forecast. is we'll say that firm would would larger customers point have but -- I a variability they up for David, And then occurring. discussion the do, What as say of some would is No. get actually

account, quarter And been accounts, take clear that's the looking -- we're exactly them since accuracy, smaller predictable a account, of degree meaningful on impact true at And less year. have land. compared is look many have to at doesn't versus maybe of which it it quarter will of smaller we and in prior the should quarter to I it on when smaller month a therefore,

high a business model. We repeat have

the about variable that's But the almost and this down, revenues, versus dollar we drug more larger then a degree demand the be a an we of annuity mentioned like to every more in from X the prior would quarter our harder perspective little up throttle. accounts the revenues have this quarter And before year, a that the case, accuracy, of a from smaller on accounts is from ones there's it's quarter particular the majority impact the what are repeat and talk then But predict. to when or meaningful value that to the next. impact

David Windley

Got it.

year go coverage of but of that was coverage the your relative normal terms absolute key us levels, of amount cuts expected. I'd the like or of Can relative fill top in the coming gives is then the sense of to confidence year, in encouraging get? give what on kind of improving this for you setting? you Bernard's about half much on not to do now the and can to you the in answer the then the to pre-COVID guess go-get in versus that how levels order level you confidence have I second And Okay. the some patterns you earlier that the you're that get of Like year as

Bernard Birkett

on would give and coverage get on exact to new the like our is pretty I around we're the out it. customers, based would in and it And their to order have we're get go now and confident then for with get forecasts but it's that order understanding and guidance and going factoring that rate patterns their What we go reasons, that is being obvious understanding of and conversations this are. to all what not more changing do able number, that delivering -- Yes. patterns it's say

given us the So that's what's confidence.

anticipate said, anticipated. I Obviously, the And hasn't what as isn't earlier around conversion from way it of talked when a that year, go a perspective. had in certain in dollar large we of about we rate. size to confidence level would as a the the and have materialized have So we it get we

numbers -- have reflect to had adjusted guiding our deliver guidance about so to. we on to we've being able the us that So we're give now and confidence that

David Windley

the Bernard, instead Got we're shockingly -- did of X% point, and X% going of to kind things your the customers year to say X% much be kind not X ordering earlier of the as you construct. about in was it. those And and X% similar to when arose management did to guidance

invoke year. about conversations them earlier are go same. and the talking middle rate. here I'd having So done year growth in of back the you guess at those also had I the look We've mentioned the again you pre-COVID in you to levels the and that

even said It a it's above like You looks little XX%. XX%.

of in a How confidence your growth that are below revenue X% should that that guess that year level X% to support dollars your need that hundred there of the to use would to if that be upside, that were multiyear there's still the million the year get before they we today into we still a an customers' that's rate growth long-range a construct, work I from the through hundred a get overbuying levels imply grow would guiding flat couple where couple be what next you're using level? to growth or million bias conversely, midpoint inventory to of not that LRP, of targets differently said do that you or factors XXXX. dollars still of

Eric Green

this I'll David, X start with here.

the in growth. the biologic biggest years of was CAGR, One out drivers X taking the Covent last

And a market for a high, XX% is the X we back customers, years, number of biologics sales was positive. of that see recall exact have of I of number forecasted with accelerated business, but outpace biologics ago, years overall recall. really X you approvals, sub-XX%. those a about our don't that of number the over we still which progressed to the our years me, the demand few as the rate and If . And if was but participation have X it's there's percentage or continue I our the

I of business XX%. much Now is were we that larger. the believe base around it's

grown percentage of company in the or a we the whole company So size. exited and has double as

type to So kind we X% little the operating a close off leading with a give base us of a in why continue we we that take X%, feel as say of to going growth of -- we we're It's business. bigger financial with will of X% in a is bit, that HPP forward X% the construct the forward off think consideration. billion area biologics to $X

David Windley

it. Got

Okay. probably I'll I've leave but enough. more, it X beaten up to . was at that. going it I ask

Operator

Our comes next with question Research. Nephron the from DeBourcy line of Tom

Unknown Analyst

CapEx. question, had I quick guess, a Just

So of I XXXX. to current maybe expansion you just you think long-term weaker -- wanted ask number to to demand has sense demand as of just XXXX, but the or guess, endorse look short then to capacity be revenue the expect get not you metering to the due and And CapEx, level XX% down term, just consensus CapEx destocking? that would number, maybe CapEx year-over-year million and to in going $XXX to just down the of how I so versus XX% I a of you're,

Bernard Birkett

installing. us to some and we're months different areas. like right looking of to layer that the is targeted experiencing the that at to at would really level lead on is number the you're what XX, and say depending the I in we're this Well, a XX, I'm times XXXX point. in guide not going in now technology higher compared levels that of the of that cases, making capacity, CapEx But growth XX we're at And for investments pre-COVID equipment

need the looking we're that, proprietary at our GLP also from we looking participation at we Biologics. changes regulatory across We're looking we're what looking And And finishing sort more are capacity what what perspective. we're again, manufacturing the when are landscape, contract then so of at there need at And doing a markets capacity requiring growing. there. both and we're

can next drivers years for that over that on have powerful X need we coming we actually materializes to demand to respond. we've growth of it for So so got us, pretty meet couple the when capacity installed

pushed So position in lead frame. our we time the out don't the like where get times get into hedge the COVID

would and CapEx the be we we that X% long-term HVP creating of call, to earlier we'll we revenues. to supporting top contra to on levels and of mix more shift said targeting, Looking or again X next back of target as the growth that supports more get be growth. expect the would to focused the on on and over That's beyond, what X% normalized our the X% X% year

you gives So color. kind of hopefully, some that

Operator

to concludes the to back John session. closing hand question-and-answer remarks. I would call now for like Sweeney over the This

Unknown Executive

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

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

Operator

participation. This you concludes today's Thank conference call. your for

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West Pharmaceutical Services (WST) 25 Jul 242024 Q2 Earnings call transcript