AVTR - Earnings call transcript Q1 2020

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Operator

Good afternoon. My name is Holly and I will be your conference operator today. At this time, I would like to welcome everyone to the Avantor First Quarter 2020 Earnings Conference Call. After the speaker’s remarks, we will have a question-and-answer session. [Operator Instructions] I will now turn the call over to Tommy Thomas, Vice President, Investor Relations. Mr. the begin may you conference. Thomas,

Tommy Thomas

and Thank for everyone. you afternoon us you, in operator joining today’s Thank good call.

President call. Officer. Our will this speakers presentation Investor and our Vice website Officer on and accompanying also Chief Chief today are available following A website Michael be Tom Stubblefield, this call at Szlosek, available on and ir.avantorsciences.com. press webcast release The President are Executive and this a Financial our Executive of replay

up open the for our prepared will Following we questions. line remarks, your

I measures. including results new statements the only measures today. to make reconciliation any events update we information, SEC or non-GAAP that developments future. whether This in of do some will these forward-looking not that federal will those subject may forward-looking forward-looking and as regarding we we These obligation statements of including the These they forth assume to statements statements speak are made, that events result we a to uncertainties, as of include date forward-looking laws, occur would of in are of filings. believe from in discussion these note differ like may and our call statements a any be or non-GAAP the found can forward-looking a or presentation. be otherwise. number appendix materially Actual future to developments the A within the making the set securities anticipate of and statements risks meaning that

now will call With to turn over the that, Michael. I

Michael Stubblefield

impact with Investor Welcome, earnings him the the excited today COVID-XX our has and call. time in of leading and we have the since for quarter are that pandemic earnings first to Tommy. joining us the Tommy for March all last us to thanks Avantor acknowledge want call. program. you, in Thank Tommy had I Relations Thomas started to our you

our products that the situation. safety current customers of families despite our the of staying time. the and doing while details hope the challenges unprecedented today, we your you I will are mission-critical call terrific our share the this and job of need safe And ensuring each is a to during also managing during team about wellbeing solutions provide and business the Our efforts associates.

I a review am Slide on starting brief Avantor’s X of profile. with revenue

our Our combined even diversified a customized revenue base, very the environment. of business resilient makes solutions, nature our recessionary model with in

are markets More Middle very is emerging our the We to than for we Africa. approximately expand comes and Americas, in well-positioned more end revenue are half than East and of products as of attractive our our and life capabilities our and XX% revenue our Europe revenue sciences the of the Asia, throughout the growth investing health approximately continued and business space, represents customer in No services. care. and single in two-third and of in X% markets proprietary-branded is biopharma recurring, from such

into Moving Slide business X, some provide quarter to highlights. I our insights to first want

other across of World Steering research we from precautionary Control our Prevention our leaders continuity our closely of and have guidelines remained health providing manufacturing the business drive associates the business, Disease to As To agencies, swift pandemic quickly and response mobilized and operational. sites as for Organization, COVID-XX a taking distribution, protect emerged, implementing our and health operations, safely a Committee collaborative Throughout Global Disease for and credible Control the Health and wellbeing the as European are on pandemic, with focus measures. a and Centre the these we monitoring well customers. Centers cross-functional Prevention in including to

the for proud support are and develop and world of very who circumstances. treatments we implemented well associates their in processes, to are working believe workforce of we extremely the work who around vaccines many serving work-from-home remaining our including COVID-XX. have customers, sales continue the I’m working For personnel, all tireless which our

development, sciences in testing, production life services portfolio therapy patient broad and trial COVID-XX-related widely is Our treatments. clinical the being areas, of used approved in ultimately and vaccine many including

accurate moved serology by rapidly enable real-time have offering and DNA sample protocols PCR. We to in fast and RNA research and results collection, extraction, products and

portfolio biopharma With capabilities protein and qPCR, are of are focused such partner Avantor our is an solutions, aggressively and Our COVID-XX and important our broad formulation, in workflows, cell the vaccine and customer customers and cure. for critical. culture, on research, therapy purification access and as extensive race a products

in first key growth advanced of our the We quarter. elements strategy also

protein new profile Fc-fusion downstream on antibodies, over proteins working For example, molecules. $X our antibody proprietary a PROchievA, product launched immunoglobin time. resin. This and focuses enhance purification enabling our customers market best-in-class performance monoclonal and with processing, This margin A chromatography expand addressable will over billion by we product innovation for

capabilities, in center. bioprocessing may product our you PROchievA Jersey of build and Bridgewater, out first many invested center of As one recall, expand capital we technology new to have come to this the of innovation significant a is and New innovations world-class to

expand our are schedule. Sugars hydration, Additionally, to HPLE on investments our single-use proceeding announced previously capacity and biorepository

the that for our investments are excited environment. challenging growth enabling in this future prospects We’re even

traction XXXX, gain our continues growth driving we System on synergy the addition, complete track to in the in Avantor In remain to across VWR enterprise productivity. and and program Business

financial toughest was as presentation, the few was government on X with our expansion government-imposed prior the pandemic. late in a like Slide the in quarter. growth impacted the by chain biopharma solid our and quarter growth to for the representing by I in high to Growth share as robust associated challenges around period, by remains comparison. controls border of from where the highlights business, Americas revenue single-digit would X.X% Growth well led supply demand closures related to period Turning Europe and world. the lab was Organic academic

revenue adverse growth the in per of a Double-digit was margin share. from X% up quarter. share in was quarter increased driver adjusted our $X.XX proprietary adjusted impacts, EBITDA to XX% materials our currency expansion Excluding per and approximately the key earnings

very leverage to our with flow in net quarter. was earnings flow, of enabled million growth, $XXX the this of to We range reduce to Combined We fourth cash XXXX. generated free remain end the XXXX. we de-leveraging strong XXX% us target continued Xx to leverage X an as X.Xx of at from EBITDA. increase our Cash committed to of the X.Xx, quarter down approach compared of

the Before I the model. I to want over Tom detail, of business to discuss turn in our it resiliency to financials more emphasize

Avantor’s with our motion execution recurring culture markets enabled more this in We to of is science setting and base, a of offering, broad a resiliency. reflect significant ever System. and are Avantor the now meaningful than QX end revenue positioned strong well biopharma by and attractive exposure product highly relevant our like before, mission Business results

to turn it Tom. me With that, let over

Tom Szlosek

you, and our hope I listening afternoon. well. Thank to is call Michael everyone good doing

start profits Let’s all Revenues, and flow on strong. challenging X. environment. cash Slide We well in free were executed a

and demand plants known centers the the assembly have prioritized or and continued some essential Michael manufacturing given challenging been pandemic. be as as supply Our limited, by operational protective distribution pandemic. extraordinary have although disruptions throughout status fueled the PPE, and have Vendor categories, generally otherwise equipment, remain personal to indicated, like

supply Overall, closures, X.X% in driven COVID-XX by challenges. biopharma of science X.X% school closures and should of single-digit the quarter grew these all our high be notable quarter. with result context life a government points good comparison, the growth in momentum and K-XX sales equipment was this XXXX. challenges. tough protective growth against chain platform revenue solution, single considered that strength quarter was in of academic Growth the single-use was offset the was XXX reagent believe additional in of continued Organic contributed and research approximately to This and in of of a net the factors, especially digits, labs, in the and first COVID-XX that growth equipment. We growth AMEA XX in with our personal by instrumentation COVID-XX-driven basis of declines high

growth and I technology education revenue disruption decline. in felt organic which care decline the mentioned. approximately impacting markets, representing Europe, growth end applied AMEA, regional earliest the care applied technology from care and offset and sales, and where impacted was Americas, advanced end & X.X% were the offset materials market This our & enacted, X.X% materials applied markets. XX% end perspective, advanced X% largest represents closures biopharma by the supply of markets, a which India and biopharma offset a represents infrastructure. organic in region the of biopharma growth with reported aggressive and at by health demand by approximately in sales, and revenue driven lab technology chain advanced sales, was decline reported global in health global of flat markets. materials COVID-XX, global shutdown the approximately health Revenue organic in academic by reported by revenue XX% by growth X.X% driven markets, Looking end as mandates

for product single-digit will revenue our April. Slide our organic the is quarter shows X group so the of experienced of what in Biopharma, low-teens on the and growth, organic growth XXXX. growth quarter. high the revenue light end organic revenue, XX% which I in representing first notable also of have by far seen we month in touch approximately market of

to platform, solution. our biopharma including double-digit in growth see production growth continue single-use of strong our We continued

COVID-XX chemicals in testing. we strong for digits. which XX% March clinical and and revenue, growth healthcare, had approximately single represents in to low ramp demand especially to We laboratories, PPE our Moving consumables, support of grew reference as

Our in revenue with representing low decline. line performed XX% of experienced single-digit approximately platform Biomaterials revenue organic government, and our Education plan.

our research mentioned materials other to impacted petrochemicals the pandemic in organic in representing and mining industrial We forced by low of These realized beverage as government and growth. technology and and materials, XX% business low our businesses applied modest defense schools single-digit electronic experienced Advanced this the approximately declines labs part revenue, as and many Also, strong we growth. COVID-XX the of single-digit academic growth revenue K-XX moved and As through businesses. were by food and were segments. previously, offset quarter. close miscellaneous most was experienced

with and with products strong Americas. instrumentation in model, Services Equipment especially experienced digits customer product Europe. low services was and CapEx digits, biopharma group, materials the lab growth has our continued in investments of in production. continued, high and driven across By April, our reduced the down growth strong single reflecting In biopharma the momentum grew and mid-single proprietary base. on-site particular strength double-digit Americas in growth, consumables by

are COVID-XX we and Academic the actively continue customer including closures to in March market, of impacts and to to with and diagnostic have supplier serological capital solutions. the we growth. partners Also, of kits to revenue spend bring COVID-XX-related second customers half headwinds continued. our offerings be curtailment also engaged experienced The lab

has market business in advanced Considering is COVID-XX April as in felt. materials Also, is procedures timing-related net moderated elective to expect the the factors, technologies to range. QX. the there fewer of from softness Additionally, and revenue in we the our applied of some end low the growth portion healthcare impact mid-single-digit be decline industrial these

the the around for intensity guidance of are uncertainties we our the however, pandemic, withdrawing duration Given the and year.

Slide expansion. of reported EBITDA with to adjusted let growth EBITDA. and basis in XX Turning points X% achieved X, our first start quarter me We adjusted margin

in As XXXX. QX favorable IPO, offerings, drivers would growth the without in the the you a strong we by support mix, XXXX recall investments and approximately this added we in to in were of that by region. status were and continue have performance offset public which, Key company costs of particularly margins of growth, of quarter points expanded proprietary first partially our growth AMEA first the still quarter the price impact company to basis volume have all make, including certain XX private since post

$XX improved the strong quarter. cash Un-levered cash Also, the free million was We approximately interest an Free contributed of $XXX to flow for increase. very $XX the over to working lower a million taxes increase improvement. combined contributed million, $XXX flow from capital which performance cash XXX%. and had to million $XX million

income in well Finally, XX% the our the performance margin de-leveraging by in reduction adjusted from rate. organic share growth tax expansion operational earnings the for quarter, and expense interest the ongoing our we as sales in per as driven reflecting improvement our strong and primarily reported growth

our results. segment Slide X has

measuring profitability. We way have in a we change segment are minor the

and adjusted previously, Effective now X, that using recall we may entire the using have enterprise. profitability the of conformed EBITDA profits to are than segment a as and the metric entire management the a measure for EBITDA more the segment for You enterprise. which to the adjusted two profitability we we were EBITDA measure January use reflected measure few the adjustments of

in segment restated to results While adjusted we XXX comparability EBITDA have for the EBITDA. purposes, no points enterprise. XXXX improvement there the for the basis change Americas adjusted reported for is

to relative consumables, proportion points Key growth, equipment materials adjusted and higher EBITDA, drivers sales COGS management growth, volumes and in offsetting by expenses reported price sales improvement XX to in all all inflation volume basis including, foreign by strong growth modestly relative management Europe operating XXX basis offsetting strong driven Key driven higher include operating volume COGS drivers adjusted reported in inflation a decline and SG&A EBITDA. price in costs. personnel. proprietary of AMEA positive unfavorable include mix exchange. and and marketing impacted higher lower and by research, lower expenses, points instrumentation, of investments

And that Slide summary to our to points on program. in we by We loans. the approximate in lowered our XX, we priority XX basis brief challenging of for January, major To on is EBITDA, billion costs On start, environment, our borrowing us. term accounts be costs quarter. leverage despite we de-leveraging receivable and points March, provide basis noteworthy a lowered lowered a continues XX liquidity. securitization this the in our X.Xx the continued $X it borrowing by first In

$XXX primary that the unsecured in cash upsized at in receivable million was up source million, March free also revolver by of our XX Total and of facilities cash, Both made million $XXX as largely is of $XX $XXX We million bank time. million are $XXX the unused our program securitization flow liquidity same liquidity. accounts million. to at $XXX

revolver and would substantive to borrowings market were first-lien limited outstanding only we significant flow upon. are no strong revolver, only our to even maturities borrowings liquidity be our challenging the cash of than we but no have is on EBITDA. Currently, event are less we threshold, trip X.XXx are XXXX EBITDA. Xx first-lien this We summarize, covenant, in have committed these debt there more Currently, our and to borrowings if and which the conditions. than To until XX% are we the de-leveraging one have triggered in debt drawn our

opportunities we Our debt debt forward look maturities re-pricing in future portfolio. and covenants to are minimally intrusive, and our

With will that, to Michael. hand back it over I

Michael Stubblefield

Thanks, highlight We revenue our markets highly attractive business de-leveraging like model. and the and portfolio well Tom. like challenging and generation reflect Challenging of executed the and our exposure I resiliency cash times environment, XX. mission-critical our revenue value am recurring outstanding Slide biopharma. product end on this a in EBITDA growth, continued base broad our strong to of

long-term and our supporting remains us steadfast associated issued initiatives strategy are with intact testing, our previously to pandemic and uncertainty this treatments. development production While of has customers and current the help the commitment ongoing in we caused to withdraw ultimately, vaccine our combat guidance, the therapy growth approved our by virus in

Our more. never of better thank you for support. and investment sincerely want to create your world a ongoing motion in setting interest mattered Avantor in your to science I has mission and for

to call. the will the I over it of turn operator our now portion begin to question-and-answer Operator?

Operator

Peterson, Thank Instructions] question from first Tycho comes you. [Operator Our JPMorgan.

Tycho Peterson

today. and making investments talk Can about about like vaccine some think Michael, positioned the business the over the biomanufacturing, the growing you’re you bit of thanks. as production? about maybe how it’s Hey, just to degree monoclonal may market? you we now investments little start of be I’ll and a are feel you I antibody with XX% think demands Can the making up meet talk scaling of of you just you

Michael Stubblefield

new right about exposure important Yes, have is an in be the Tycho. that centers inauguration the the R&D building Good our the question, invest, we’ve couple center of of of for of of continue hear you. form our in Obviously, it it’s in around most most whether years. to experiencing think for in been Shanghai. you recently, I bioproduction. to that do double-digit the of infrastructure portfolio the to globe, from growth Thanks And that terms last part we our

proprietary press capacity We also Bridgewater, addressable in our that out release capacity, in number capacity comments our that chromatography whether single-use size our or highlighted invest first in that of or the our market. manufacturing Bridgewater. recent the there, recently in of We areas of center to in also and in we a one HPLE doubled that hydration platform. resin, things expand we months, center of Sugar be the the new continue will or highlighted in those like innovations But came

So the would therapies the can pipeline that new in the that to that be in opportunities or demand of we I growth but continue are the out new say and in ensure the success been we lot of whether that cell , monoclonal some well we things we of go gene invest also we’re what well positioned, to have whether robust where that COVID-XX in excited and traditional to it’s the positioned and modalities, the ahead to there. are about meet have onslaught are Tycho, are a therapy. virus, antibodies we’re like of pipeline after seeing,

So and be able speced going platforms into our to presence forward. we these continue capabilities to infrastructure to scale our materials get and our

Tycho Peterson

And oil applied you business Tom, just part on particular? up the that been prices technologies, low petrochem for noted curious single-digit obviously follow-up have in outlook on then one for volatile, of your

Tom Szlosek

Yes. continues one low single-digit, aggregation Petrochemical, I of various we Like segment modest watch a but small itself It’s it, probably that I said, of like pretty oil Tycho. individually those. to exposures portfolio. number reports. get revenues, was it’s part gas a of kind daily XX% Everyday, mean is we it of the sales an that pace. industries. we is mean, of on overall the and of flattish,

impacting little We bit of are a seeing softness industrial the that.

negative major news that but is some a like growth of bit, is there – moderating saw rate to of growth sort we it’s or it’s that not a So curtailment share.

if but through kind so of okay, the you it’s roof, growing not will. So

Tycho Peterson

Okay, thank you.

Operator

Bank to of going of with is America. the question De Derik come from next our Bruin line And

Derik De Bruin

afternoon. good Hi,

Michael Stubblefield

Derik. Hey,

Tom Szlosek

Derik. Hey,

Derik De Bruin

just single-digits the correct? one clarify a phone second you I So quarter, because here, had the first of said little of bit couple a cell low mid questions. a down I to in garble to guess

Michael Stubblefield

out. situation we on we seeing – through see we the don’t to of uncertainty we color give just the Derik, in didn’t what see where what full April. on of seen we on really April. I the quarter, month trying We think based for are the are call what some on trying are April, what quarter the that’s given to have yes, that we you of based kind playing comment just

Derik De Bruin

Great.

that So follow-up somewhere of in is would are academic be of XX% and pharma sort what your that I say between was can terms guess street to labs estimates of then some Obviously, or going you be what difference going to there’s doing. the ground I’m wondering on the my our labs question just of around are put closed. the feet labs.

is color need sort what play of to on the seeing of next are And what closures out? couple just guess is are? go you biggest how on sort some wildcard how to – of the duration I would a it closure long mostly quarters Just

Michael Stubblefield

therapies I Derik, the in in that the do at on closure, are business operation, academic the partial in headwind operation our see setting. or particularly clearly, the think we’re round-the-clock moment to university we environment, lab closures lab research labs of from seeing to COVID. everything is working the that complete for vaccines biggest And

normalized environment, got business. the least in activities return tailwind would in at we as of the to And certainly space current be see full the variables in operations that the business. them, gamut playing our headwind with but out, it does the So remain for more a biggest we’ve a

So that’s happen. going just know we to uncertainty, when don’t the

Derik De Bruin

one. legacy a I lot of – of has recession. really into an Great. the nobody in I business Avantor mean with And A squeeze experience final sort the of mean us one – going lot us I can if

in a into of sort just VWR of like of your sensitivity of to a environment? animal sort on any sort – Tycho’s are economic question this understand old we looking over sort at thoughts of are and recession downturn severe of the when the macro a is have just getting what is us to it And follow-on than overall business sort and sensitivities your of the of because different

Michael Stubblefield

Sure.

that it’s that talk that at the by other we run we’re biopharma amount, headwinds Certainly, just are of the expecting with COVID. the situation in well well. of some ‘XX single-use if diversification clearly, in go market lab, proprietary or would up or in academic good portfolio financial and the chain equal model, good very in are have to for a XX% some scaled activity continue whether a a lab of in the some in that now the labs. revenue extreme space, a given at dynamics. made a you is a obviously, as rate, lesser held back to unprecedented. probably we continue both sure broad has resilient least difference after, think in the our almost production we investments production. well-positioned extent, value recurring, very an seeing therapies that the even extremely research we’ve we’re not even therapy in we currently parallel I the crisis in vaccine to labs but And being environment that the high as to current activity, for about a say with situation, have our have ‘XX those bit. I a technologies, up In to I’m outgrow the approved The is ramped very

into legacy portfolio, of high-growth primarily speced the the production-oriented So platform portfolio, to bioproduction your I space. think the where that is revenue is the a question, Avantor of preponderance

So we insensitive I shock, it driving now but bit the the think probably much environment business, agree little think and different. different to be we a of tends are fairly all are I what’s a in to dynamics economic are

Tom Szlosek

at back that – VWR as on public as standalone, also did was up flow Over least – side. held weren’t strong. Avantor public they EBITDA the was cash numbers back numbers we pretty but in weren’t the the when timeframe, And Yes. well

Derik De Bruin

you Great. Thanks for color. much. that very Thank

Operator

Evercore to ISI. going the of come Vijay is question Kumar next our with from And line

Vijay Kumar

on question to to look the to at are or the be the Hey, of That relative month-on-month. to figure this April should sense good things and we on for of companies. had. if some was that trying The case Maybe I out here it business on a starting certainly guys. guess all I the for make and comments congratulations seems prints a April, really does my Street bottom the guess around fears week-on-week some other it Thanks basis taking improve

So, what wrong, sense could right? go If plus May happened or were the wrong from all closed, April? April, trend that minus just what anything of move would go from to below maybe a So maybe could else be we which labs cause and some April on give where could in us line?

Michael Stubblefield

Sure, for you of give little X we the color your that, question. of Vijay. markets the through end Maybe Thanks with hop question. serve, maybe bit that walk will and you on that I’ll a each

and as here, see you back and mix is clinical April, of ramp So that pretty mixed revenue, primarily There scaled a mix environment holding that levels, solutions biopharma us, or ramping and half About is a a is going the a that platform strong. single the little we of exposure. of running the be levels. a saw piece and little QX platform, story overall, high historical it bit world. being there. starting that’s below up. reference-lab-type in for our our for remains for which setting, of it the of of have research strong biopharma, diagnostics that some are a little XX% And whether platform bit It’s in Obviously, things is testing. less revenue, the double-digit-type of with around to up on XX% clinical strong roughly labs of than diagnostic-lab-, offset into demand well. the some in continues digits, Healthcare, running are we COVID traditional by that, bioproduction the be the some But

quarter, elective the high our of the least through mentioned, serving platform to due of at And pretty devices, array platform implants. continues run, a that we first rate, kind as a wide pretty postponement April somewhat part of medical that moderated platform other The of is to at implant in surgeries. biomaterials

that we’re variable pretty a that’s closely. so And watching

We are probably April the speculation sequentially that. of these closely, and will very watching do our advanced on the The close you as about mentioned, overall the those clearly wide I think first is there revenue. revenue. I academic kind moderated to in about talked even research say in part services we’re what some try site our at April. the part our will some daily It’s get on And it’s bit in being in presence in the environments, bottom part labs. line industrial through into in first what’s teams and range with likely applications, have shutdown be lot that not labs that materials I government customers. research digits contact the reported a mentioned, applied split we’ve carry single lab, less of academic a them of than about aggregate, would think basis, a significant beverage and and technologies of We And a what comprises these the saw QX people our the of And of see across that we restarted. in publicly. academic we’re in grew XX% to and seeing are or I Whether both business, labs strong with teams defense, XX% in on revenue, in back gas. the & is in food Tom semiconductor, likely call low momentum of the labs our industrial to of areas, quarter. as going then on like of non-industrial XX% oil

the of staying we’re Vijay. a that right the close now, to or globe – to probably or pandemic May to some later, tough start that’s that in We’ll gets return, and whether is call So bit it crossed under June fingers control. see

Vijay Kumar

million we is and shake Tom, That’s that’s go helpful given on maybe and out if we environment, looking the for sequential at is The strong. how to then original back the your assume comments, fixed free Tom, flow almost really is $XXX are flow, to if one Mike. could $XXX cash looks I improvements, XQ like guidance the XQ comments change. and cash any for on companies million other almost potentially cost on And bottom variables? free structure, were And it improve, where had to margins down. year, versus There QX no the

to on fees? So, any and manage your cost structure your you. ability thoughts Thank P&L

Tom Szlosek

yes. Yes,

at the is now. the that – when XX% on is we’re employee track a we to say, would we we and top would our as Probably first, It’s people versus actions be Vijay, when are broadly anything would when can’t Probably have it’s that right of cost category. depreciation, I fixed at So do. would a say. on focus variable I you not good mean SG&A that materials. initiatives, most supporting into I look also cost and have you the structure, kind but of the fall about variable, fixed record hand, containment of if there is could now another cost. take. it. look mean, most is we I And safety you other And say I category, XX% do plenty mean, are But would of mean COGS, addressable cost – it think of I overhead. it’s customers. priorities a like management, about our I right

our on program. We’re nearing synergy completion

the achieved million $XXX we basis. run-rate quarter, threshold line run a rate from first a crossed the – on fact, basis in In we

least – to to X to we’ve but the quarters go that, continue bottom drive have we that. So part of achieved at in

what’s not going on. oblivious We’re to

monitoring actively taking headwinds We’re actions. and prudent

so was for forth. the or own around demand observations. a plans we’re and the with with – new discretionary And Obviously, items so extent in action does other modest traveling. you extent at just people very taken P&E we totally work the with have obviously QX us. perspective, like become we’ve disruption to contingency its mean, some been – many would I And to agree place. From discretionary But there’s the worse, looking things not I your conditions far, So spend. hiring for cash strong.

we We’ve And obviously million that demonstrates better million $XXX performance We of We was have. low lower that. cost. year. really $XXX had We’re conversion, with our strong capital up model working you the million as $XXX high interest the said, had year-over-year. $XXX got already for guide And it EBITDA. million CapEx really to

takes and you also own some can you. gotten think say math You that where your benefits. We’ve do

expect we’ve particularly to been of the benefits some from that XX% some get up CARES limited Act, – We have we around this interest the freeing past. in deductibility to

And well. think up XX%. us there’s we’ll for CapEx should don’t all goes will that I have some plan. the in probably, spend some tailwind opportunity point, So at refinancing. give an we to that be the I as think That

out Maybe we’re factors we’re the So to an withdrawing guidance, be on – because million a turn, right, going. out. $XXX to this And mentioned, receive – QX million where to what if what – attention. think opportunity to going will things looking that’s you’re not continue continue referring. $XXX will performance and turn optimistic be really there’s those I this we But think, We’ll instinctually, our – you’re I to we’re there. comment that we’re

Vijay Kumar

Thank you.

Operator

you. Thank

to come Cowen. the Schenkel, Doug of from is question going line next Our

Doug Schenkel

Hi, good afternoon guys.

Did that into And it? seeing it every was we First if know seemed quarter. off, carry it company it activity sure point, so, stocking at looked when I business like I that some some by But And in the the don’t talked, April? when March. March pronounced when days, the case? not most was it of But we area? it I’m a at where month like the so these was how exactly know In hindsight, was it end was like was week talked seems when, was. material

Michael Stubblefield

did like question, we while ago. the to this a when March, It Doug. seem, speak in does for Thanks Sure.

stocking I ended think mentioned occur point in range. which as big script, think Tom point did As being we to that up in probably tailwinds, factor. it, stocking can basis of that bracket the kind as best that the we include quarter, any would in look a related basis at I XX don’t COVID of XXX

really value part be set whether the more labs, of storage. world I some or basis. a the countries or to science in significant model that we of to COVID development. have they we us think think have and that I I than in around for And example, to don’t to life do stock really they safety able to what excess XXX the testing on meet or in to that what drives in increased of mind in same-day the of demand, able next-day a with that other And here, keep reagents is provide think fact, we is that for of on deliver, we’re point up, most rely seeing most that really PPE support, related the deliveries. be support that space carry the we’re And lot timely

was some quarter. in the sure I’m modest there So stocking

points. saw XX think basis tailwinds But that’s think we COVID think to we XXX that of were net-net the I most I in that that captured demand-driven.

Doug Schenkel

just that’s business clear a challenges ask commented I then the of majority to I is believe tailwind. it. then Any at make wanted is in over and queue. that that’s area was you. helpful. just business today And wondering pretty much update is AMEA. that, get a couple Thank I it’s that super up terms of your into few on I’m Maybe I’m quick And on I just vast sure trying India. OEM. Okay, how the an remarks to all. based big is just I’ll Specifically, the is chain second diagnostic how wondering ones thing that’s weeks? supply right. your just and on you’ve back freed prepared of at the just if of want in tailwind you last what to am seen get a what

Michael Stubblefield

Yes. Thanks for questions. the

here. reverse pandemic We’ll X% that first. So is and the maybe we’ll and first talk Obviously, region order about revenues. region AMEA hardest, the in hit go of our

consumables bit So relative the driver tend schedules tends bit you customers. to and and owing out Americas. little a timings AMEA within of But challenges more of to of getting bit just the to in or so that to was Europe in a bit middle and chain as different pretty we we see lock in the down of a end, have for modest. trucks rather quarter. mix country the to planned. and the of the did the the production-heavy, aggressively not It we in region drivers challenge starting And a challenges. logistics But When a business saw on be some about March. supply a to complete little campaign think business, play more part major in see, moved lumpiness and impacts, India, certainly, the our just pretty in and some as obviously, things example, There things batch, the you business environment much the were deliveries

think improvement in we seen sequential to into generally, those markets. some April, I sequential think, improvement we’ve we’re Korea, in think move see even I And As China, you’re whether I Singapore, starting into in April. India,

feel So right like think heading direction. in I region we is the the

Tom Szlosek

could I Yes. to could when for that official heard date extending think, say month. recently be I’ve I - it changing the X, May that lockdown and India goes. Because the of India will the end the is be is of could

So to who knows, and we’re that. subject

upside seeing start we are of other protection COVID-XX-related and areas, through. come there. some will these continue are whether little bit of that it’s in as point, to So equipment But I coming mean, things to things together more testing, the challenges personal a to be Mike’s

Michael Stubblefield

then diagnostics. and to back Doug, around your first question

different space a areas. number We’re in going that of play to

to of the various there. We be specked reagents, into instrument an have – basis OEM a go out proprietary on that portfolio are that platforms into pretty They’re robust will reagents. going

and a a disease to in have little pretty testing hematology, here. maybe robust kit point-of-care on centered We closer business focused infectious the home AMEA region then primarily

and other as have testing pretty our COVID-related. to both that’s that one diagnostic pretty facilitating support lot major workflows, heavily we sample involved would then now. custom around qPCR of collection as in going in And non-COVID-related to archiving to a and pretty the support to with also to most get going COVID kitting things And in that and involved of of a is diagnostic transportation We well regard do franchises labs the extraction specimen services of the linked goes the and we workflows, be sample platform leading whether robust world. be the supplement offering biorepository to that reagents prep, of diagnostic workflows heavily that the the a and testing lot we’re collections in on have and fact, that

different exposed be going we’re a space number diagnostic Doug, to the to So in of areas.

Operator

Thank you.

come from line of to Our Brennan, UBS. Dan next the question going is

Dan Brennan

you It reasonably flavor maybe despite is maybe unpack your was like doing? business and on I looks that I elaborate that for know thank in business. the going a it, and little congrats question is about Great, economy. certainly to on business quarter. the think, that you. go wondering little holding you you a hoping Thanks like little well to more up give to industrial bit? could of question what’s I’m Vijay’s of the I parts a taking if the broader can talked bit maybe how

Michael Stubblefield

way materials of XX% exposure is the advanced Yes. to part to going in that the Most Thanks of applied you. And the would industrial end of in of the non-industrial various which we technologies be mapped a & roughly to have none themselves of that, defense, of for Good our portion revenue. kind here to are revenue. business, of then play nature, going way than question. be exposure is for example. into mix semiconductor, couple would is you going a which of markets, of that from by the the we total in characterize be more play Within we percent industrial-type

gas, of to of seeing and like mining, to that’s for a So example, mix oil are performance And kind things there. some extent. petchem, up pick we going

business. mining the take You

flight a a jewelry-dominated from to being where have gold you look like things gold, in has curve a well first propping in shifted a pretty there, of unique particularly up maybe the at that part and mining, generally price demand Oil macro We gas, currency-driven the up to safety to the exposure in if pretty of in demand crisis, there kind petchem more and business. quarter. held the of pricing

the with in hold price line so diversification, reasonably April declines part combined have that business high fallen dramatically oil And well. there, off allows as exposure production have single-digit into up think we our it prices, pretty as things We the the think seen to decline like space. and unique sequential to type of with moved I oil that

part significant the expecting growth aren’t in of We that year. this business

If us a headwind just of while the of see weakness around a moving that’s a industrial sequential it’s into for did quarter, us the some at and given that you headwind most for recall improvement in We major bit was the moderated of somewhat, world. first XXXX not year the the moment.

Dan Brennan

a flavor, I a base, biopharma drag? Great. outlook? know, you the – but the company, That bioproduction business piece is QX flavor Maybe I more maybe and your I to similarly besides tied production – like Is how mean of Thank and you a Has you well. they I that largest the is like holding of for broadly, different obviously pretty of talked biopharma, for piece? hoping, kind just about how give more your was customer think little was think clinical little the could it research the obviously, within highlight And biologic how detail. that. Thank did about give been kind that great the in business more kind and the pieces for you much of research business trials? you. how and a up

Michael Stubblefield

Sure. Sure.

then to running be part our in And So for research the within our to our to as, and is and be breadth than so to play revenue, environment, pretty those the in materials experiments the labs. more be roughly split focused business model. services is product one-third our managing a We’ll our focused and the that think can early either half their to of we integrated Whether of about roughly X,XXX or And then, environment, is in proprietary obviously, labs, that phase course, will we’re the bringing such one third-party have consumables environments obviously have customers. be is customers’ our in important research environments roughly customers – we business pretty that And they aspects as and going us associates portfolio. and of laboratory a bench support our sitting consumables, in or that that’s going We to full embedded of labs. of biopharma, formulation materials us, our going process in with and of clinical biopharma and going bear move then them a the bioproduction. scientists the two-third, offering on commercially and the key upstream, the that’s with pretty allows scale robust I space, ultimately And development both our support understand we trials. scale lab support model unique that fully to the discovery participate robust activities with those and approved that a through in then offering serve downstream their at G&P in have and platforms to portfolio. point in research

of little some pare on-site say, overwhelming pullback And the the in this except presence, an in the well-covered of did the activities quarter first in research I bit pretty we’re majority what back of a maybe labs their of for would as space. So talking some April. saw environment. high in was continuation we continuing the production we into you’re the essentially means see pretty and strength double-digit saw which in really of lab we much that XXXX, in biopharma throughout single-digit about And that growth growth a

time in. we’ve or cell across good we’re whether positioned a of Obviously, well our and CMOs, modalities, presence important got good spending the part We’re the pretty therapy business. all monoclonal CROs, vaccines at gene that antibodies. geographically, of different be so emerging coverage, environments, lot or And

market. think the upside I of to end a to attractive positioned pretty well we’re continue realize

Dan Brennan

you. Thank Great. Michael.

Operator

question with Citi. next Patrick of the line Donnelly from come to going is Our

Patrick Donnelly

decline to the how about chance April? the I Thanks be any a and more the guys. should breakout? only I gave instrumentation but I want during color about thinking of appreciate we that of there, revenue versus decline, XX%, know recurring Great. Maybe equipment April think you side kind it’s

Michael Stubblefield

Yes.

I You’re important think, a part the on, Patrick. story here, hitting of pretty

end flow whether that’s it is squeeze kind the the the gets optimize of our this market, the of previous investments. as question. regardless is, business, downturns, really hardest That to capital or part of hit thanks be in the in customers, So anything and look cash downturn CapEx-driven for of that and part obviously portfolio

And played that out where in was it so category. headwinds at as into disproportionate look QX, the you

think broader us, to though, resiliency the our surprise talk I relatively space activities our the in double-digit being we customer’s we us. But their would for the to have of levels, about at And relevant well exposure until think down and Fortunately that portfolio those of then that of category, and driver low this consumable-driven April, activities. strength when is highlights our it production declines light I the we not that high model see as that portfolio And important it’s we only XX% a and highly single-digit in of rest really expect to an recovery. in as double-digits revenue. see into research start and being our decline,

Patrick Donnelly

guys? maybe sense. for in for bit makes re-pricing as maybe opportunities you’ve get the side. know just are things And debt, assuming That when you recently here other one I on much XQ, tabled and do corona How we or a priority then on talk to and the through of side is that can But Tom, talked just you that the you the for little potential now. COVID debt think to get maybe past, there’s as as a about through

Tom Szlosek

Most all said, debt we of the quarter. the was of been return seeing levels it good be January, I the kind participate. in I some going not degree going to way in with it just follow that at, But quite we that if were trades, and to back debt our it if knew in of of and were you kind on job way the there to the Yes. wouldn’t where trading when this back. exactly has what��s I of mean recovery, status markets – markets kind early to a the has that but back mid-first was

nothing addressing our very And There’s in so guidance. still are debt. built interested we the for going guidance into XXXX, and after our original

a before to wouldn’t along. any October the It that – them. something now, best time expire. very, to our make with And sense But make-whole X, real That’s unless very it actively fact, in don’t urgency, feel said, we monitoring do right any really, – and so first came pay in attractive, any interest anyways. don’t our are have it we which we wouldn’t be see wouldn’t like isn’t there’s premiums things. We

the have our that it’s come going the degree point that the discussions play. of and action to when advisers to would take plan transpires, a and fully with well original to We to benefit while for year markets reasonably the we know get. we are as banks that into of get weekly back where with this we that going taking But confident can on pretty know a that market confidence say and

Patrick Donnelly

Thank Great. you.

Tommy Thomas

up running we’re one more so let’s the Holly, hour, on question. take just

Operator

Alright.

with Brandon the Our Couillard final from day Jefferies. for of come question line will then the

Brandon Couillard

Hey, a squeezing for protein resin. thanks me you new mentioned Michael, launching in. A chromatography

over be could consolidated think go-to-market of sort X initial and of You that conversations if sort competitively of with you kind next of X customers, talked significant the there, type how it through for strategy was the market pretty product? years a that do to

Michael Stubblefield

for question, thanks the Yes, Brandon.

model. As technology is business an proprietary portfolio part innovation, particularly of in human our our important

labs couple around been investing over to our have years of in We capabilities of the the up last world Korea. enhance opening chromatography

starting Our about formulation protein was capabilities. in in to a And heavily ago, be expression years has way three complement our flagship where whole chromatography. new center obviously, developed all on Shanghai this Bridgewater, technology the center through focused of will

a to and that. innovation continue of lot drive example portfolio, we’ll our So of bioproduction into great is a this

in We’re the of and market. pretty A in chromatography a credible portfolio, well-penetrated protein half into represents probably the chromatography the having into the space. This was space, it a not gap offering

really And there it have supply think is the I addressable so critical obviously expand is to market. base And and to does to that’s alternatives, in point, anxious total enhancing Performance concentrated market the recoveries. our today. your

supply having and like for value ligands there’s independent I and in will which such provide. things think resins this chains

and at the think it tested the as the of market. it, I performance, top put it we we sampled have

a get the opportunities of bit lab as things, time market. We’ll there’s in these lift so qualification you these think It’s a the on into We’ll see field. know. And immediately. I long-cycle a

columns was new spirit force to a gets And as into plan columns approved, higher as co-provided We actively will therapies ABS our become sales is that the and commercial. lab in revenues it sampling we have those launch start over scale program. into we’ll enjoy selling become specked those robust very speak. And and the our That of space time. as

new overtime, that in versions the scale solution at continue the introduce So to able this will impact to but invest pretty over and bringing market time. to obviously and of excited time, optimizing we’ll it to be

Brandon Couillard

Super. Thanks.

Operator

Thank closing you. like now to the would turn over conference I for management back comments. to

Michael Stubblefield

Thank you, operator, and today. thank in again call our for participating you all

for think until through at all care about Thank then, I’m passion the ever setting please of we improve I look for our look for associates around well. to life-changing which across better Also, close, they supporting treat call never forward today. are day, you end this to their globe. ahead it world stronger would our certain is world, I the the bring as to can As for every just be our and updating specifically patient motion I lies has to values and reiterate industry, people express therapies seek I’m to and outcomes like virus. second as unprecedented today. this but more we’ll important didn’t protect the and detect than is I navigate our and gratitude not for take only been our And create solutions who our science our and be what quarter. admiration everyone, the you to my if mission the a our efforts living to commitment mission, tireless of COVID-XX of corporate business. come than all pandemic and that we’ll customers optimistic before, remiss positions and And us joining help at the it, we dedication

Operator

concludes This call. today’s conference

now disconnect. You may

Avantor (AVTR) 30 Apr 202020 Q1 Earnings call transcript