AVTR - Earnings call transcript Q3 2020

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Ladies and gentlemen, thank you for standing by and welcome to the Avantor Third Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there we will a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] Thank you.

begin. may You

Tommy Thomas

call and this us operator, to everyone. you flexibility and Thank the offering. our Thank appreciate We today's good call. joining the conference release earnings on of joining decision coincide We for with timing debt us you, in our morning, to morning. made accelerate the

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

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

Michael Stubblefield

Avantor brief revenue is complete offer with workflows. of solutions starting uniquely Tommy. scientific review for three profile. to I'm on Slide many Avantor's a Thanks, positioned

products We are industries, to conduct. among in the the life our most and recognized customers and of research, and virtually is every technology the and science our activities portfolio global production used global and services providers of stage development trusted advanced

to due recurring is science base. resilient Approximately consumables-driven our portfolio comes and our and business end no revenue space. revenue Our in to single exposure proprietary of significant of customer our than model more our bioproduction branded very revenue represents services, highly attractive revenue. the markets, half from and life X% X/X Approximately is of products including

positioned and Europe to throughout continued in well in markets Asia, the capabilities for Middle are and Americas, and growth We investing East expand we the Africa. emerging are our

Slide Moving four. to

for us team more Here more top them million and of generated per a margins share than by grew are cash mission-critical third top and more more to in than execute values. environment. extremely highlights. and basis flow. in continues increased line free core quarter the Serving one challenging our a slide. their work XXX $XXX priority customers than our will these We business in on detail expanded results the cover supporting organically, I next remains our X% in points, well The XX% earnings

operational, customers solutions workflow footprint to and all throughout and supply remained scale and distribution, leverage new manufacturing developing our is have able element another our important our customer-centric innovation Fortunately, and business Bringing of the sites to global pandemic. research fully been model. our maintain of we've to

products biopharma to enhance multiple one third significant to the our quarter, offering, we value creating each our customers. During launched

customer direct have to a dispense We their bags, to with our reducing of ensuring demonstrating and expanded meet customers processing For our minimizing needs. example, of we new expanded our contamination available significantly risk. packaging single-use time our single-use addition range large-scale the complete commitment options packaging portfolio offerings, XD

Our a very OmniTop our contamination benefit low at and volumes cell enables for sample also risk, Volume minimizes Sterile customers. Adjustable particular Sampling precise and collection solution gene therapy

We used bioproduction our also and to expression. grade transcription protein trigger a launched by increase IPTG, customers molecular cGMP reagent J.T.Baker

closely midst are new our commissioning biorepository pharma and of world, collaborate We archiving and support we CRO Speed. samples in end capacity and needs to to player authorities Germany Avantor enabling the from With trial biorepository representatives customers. biopharma continue in serve including complement humidity a COVID-XX expect supply our the the to of Europe, of will governmental our the and controlled vaccine in customers before biopharma, relevant in critical chain, is of and and growing Operation feet square month. the space, XX,XXX the new us with receive existing therapy first clinical site our and this around temperature Warp facility

multiple an portfolio extensive patient services vaccines to approved important time. this trial of to during clinical approved vaccine key development, the modalities production investments and to and and, of capacity of We're Our vaccines. enable are research and of our room workflow making to appropriate Avantor treatments supporting and the solutions ramp products each technologies and manufacturing us partner to production any support in clean actively testing, commercial unprecedented the production make increase ultimately, support

has in science create more. to Our mission a mattered world of never setting motion better

quarter. XXX in Performance markets improvements to five revenues review end X.X%, in our more detail. single-digit our of Slide grew increased our business. base biopharma, of presentation. all points once Organic and headlined again in the to XXX low reflecting like COVID-XX growth of to financial basis double was which of Turning by I'd the results digits tailwinds, by

grows and As of this innovation to in raw complexity not portfolio capabilities position us development process, comprehensive excel our drugs materials, production the by the product, in and technologies space. defined increasingly become drug

Adjusted times revenue than and growth is labs. value to collaborate formulations. strong clinical EBITDA Our per hospital we earnings growth to approximately the Also, $X.XX. double-digit health experienced scale reference indicative and directly offer characterize up performance adjusted and third to quarter XX% in our in through ability quarter share XX% more approximately with we driven up by the in the strong customers our care, X.X of increased was strength or their in

We also planning year tax continue a effective now XX%. and to tax good full forecast traction rate on of make

to the free million to guidance. year. the approximately X.X strong beginning the enable generate down We year, times cash generated free leverage an cash above will from X year our full by $XXX This in increase reduction for track of initial $XXX in quarter year-end, ongoing year operational our million at quarter, and in discipline. to net and through full EBITDA compared flow than flow the times of capital the performance solid last are continue working on We well same generate more XX% to

customer reflect relationships me our our market it enabled attractive our over results strong and that, the trusted do. turn to exposure, Our by base, With of Avantor revenue execution, we System, Tom. let recurring and end Business which everything highly culture underpins collaborative

Tom Szlosek

Thank and morning, good you, Michael, everyone.

Slide low QX digits balance basis on mentioned, support related and quarter. of testing to in start Similar with second six. of protective low the half an Michael to for points biopharma increased indicated personal benefit represented diagnostic digit. in tailwinds equally this includes our We quarter, built single which, earnings XXX approximately expectation July from by the Let's materials, X.X% of revenues and release, single achieved solutions Organic COVID-XX XXX in approximately those quarter, equipment the drove including the development. as items. momentum growth therapy flat we vaccine and sales over production to Recall of to

second mid-single experienced market revenue represents seven XX% continue continued the Slide biopharma new quarter. of high marked and greater XX% production. organic X% in organic of in over low platform, a year-over-year. biopharma third revenue, big global the approximately X.X% revenue, growth, drive lab building revenue driven group by in materials organic testing decline revenue second procedure grew a to continued Similar growth by although XX%. and the growth, organic group, production improved ongoing for headwind hospitals quarter. health growth reported including mid-single Biopharma, sequential Education Looking in and mid-teens represents the reference from sales, sales, specialty applied and strength, quarter, approximately the growth with growth, to protective digits, digits growth Americas in which quarter strength close equipment the of declines in customers and quarter. our our representing by compared lab school the as ongoing revenue sales, double-digit quarter. materials strong full reflecting Headwinds sales, Advanced flat, declines improvements reported and a second quarter by Government compared was academic care and by also consumables revenue quarter, market growth business education single industrial Americas and grew biopharma and than as declines. single elective and points organic proprietary revenue, improvement beverage came and third in increased our end from to actually also increased XX% technology but double-digit Strength flattish and the balance a materials continued improved significantly, clinical reopen. quarter. driven high-single-digit improved experienced X,XXX overall Equipment the X% have quarter, Strength X%. growth. in The schools biopharma flat technology from or X% services second decline at shows Services and biopharma quarter was represents improvement clinical all teens government diagnostics second representing Health global in in experienced improvement high by organic ongoing product we Europe driven strength and in mid-single-digit applied third from including approximately for by our XX% the applied double-digit over in digit high government, driven applied from and advanced improved XX% to low our as from by Modest the and and second of growth materials technologies defense, by equipment. and closures of advanced the of to single-digit revenue and XX% a improvements reported single-digit We representing wins materials, at impacted moderated, approximately offset markets, double-digit which production was of our single-use remain COVID-XX in in the digits. year. and and basis growth on this chemicals continued strong Education organic regional which AMEA, care, microelectronics by offset growth, sequential XX% experienced biopharma, over increase the solutions, declines, Indian approximately Health closures included government second were of from approximately labs and decline optimistic end down driven of and across declines. weakness. personal also QX AMEA. capex despite elective procedures. COVID which organically weakness. XX%, roughly declines improvements declining partial perspective. the customer global negative second were our representing customer mid-single technologies continued sites services to platform the digits the revenue to X.X% digit with experienced growth markets. quarter. year-over-year our nearly Europe, By-product food to Advanced in Americas, revenue, experienced double growth global businesses. The cautiously of and the big instrumentation production moderated end site on procurement XX% investment highlighted of care,

improved XX% However, these declines moderating, quarter to quarter. actually second the the we over from third are and

mid- expect ahead October, organic to approximately digits. up to Looking to be high-single we revenues

ongoing are trends and the these over visibility environment. macro the full in the we quarter, cautious uncertainty projecting in However, forward given October limited

continue biopharma Our health improvements In forecast tailwinds continue. impact expected and gradually the we In is end care, the government should from offset and elective as to momentum modest weakness. COVID-related reopen. to procedure adverse lab market, education continue sites

experience applied materials declines. and modest expected technologies business Finally, is our advanced fourth to quarter

Turning Slide eight. to

the quarter in with containment, production all We commercial XX% of our favorable including of and by EBITDA. material cost third were discretionary strong adjusted in proprietary and growth, margin and performance offerings points adjusted approximately mix, me drivers growth offset volume continued growth expansion. EBITDA XXX biopharma inflation. excellence, start basis Let achieved Key

free with to XXX expected we expansion year reflecting compared working timing the the strong stronger flow the margin difficult strong fourth to of margin facing moderate continues EBITDA points fourth EBITDA, million lower continue, more in by be quarter interest three quarter, unfavorable offset and free the the of million cash cash and flow quarter driving comparison XXXX are will While better to of XX $XXX of Free basis driven adjusted fourth factors stands we expansion. are a to through be are track our Normalizing have cash in which payments, may year-to-date cash adjusted quarters flow basis flows. in XXXX. flow have on of $XXX the points upside margin quarter million, first expansion payments, exceeding Consequently, the XXXX at Year-to-date we to third $XXX expansion timing, prior year. cash of the capital this achieve tax free be been $XXX million. would performance generation an now

our for ongoing share our income the from Finally, primarily the our the and approximately refinancing reduction in XX% operating earnings in tax reflecting quarter, per in strong expense performance, we deleveraging and rate. interest improvement achieved growth adjusted

third the XXX make strong We tax higher productivity points share adjusted by in to reported compared tax nine margin discretionary point materials Americas EBITDA rate, inflation. basis offsetting adjusted Key XXX drivers XX%. and XX Americas. XX mix in for expanded points. with commercial of in third XX.X% income the margin our in growth, EBITDA point planning volume containment. XX% expect XXXX Year-to-date margin reported margin containment, quarter EBITDA adjusted Europe strong share. rate, of cost cost rate, the basis a to a and containment. to compared progress XXXX, a approximately margin per as improvement EBITDA a include volume XX XXXX. AMEA. adjusted basis year XX.X% growth, proportion and consumables, and proprietary of hand to excellence, compared AMEA growth commercial has to points my Year-to-date to Year-to-date, unfavorable and has of basis $X.XX productivity point Key and our adjusted rate XXXX improvement results. full basis cost XXXX. chain segment improvement XX.X% now excellence, supply EBITDA of XXXX continue EBITDA Key mix reported in a favorable XXXX. XXX adjusted Year-to-date over drivers driven approximately drivers respect performance growth, prepared expanded to it basis quarter earnings concludes per include volume remarks. Slide we now as expanded I'll discretionary This the Michael. grew include margin back discretionary as third for quarter better effective strong adjusted

Michael Stubblefield

markets on strong portfolio revenue earnings Thanks, a performance, Tom. environment, I'm and attractive Slide in line reflect XX. business challenging value top outstanding and mission-critical end and adjusted of our product highly resiliency of base, the per and model, We executed generation our biopharma. recurring exposure the EBITDA well share to like our cash broad

approved to opportunity. associated about COVID-XX now will the been life achieve we're portion uncertainty While and Reflecting and and support. steadfast I question-and-answer your continues, and combating focus executing endeavor, and are The sciences this interest call. you for initiatives our our our the We the thank our book in order critical we has investment of Avantor long-term our greater. begin doubled, with I has the bioproduction breakthroughs turn pandemic testing capture potential our your remain ongoing want investing for in business to optimistic on operator growth to more in over our remains are strategy the ultimately, future. and in to our it role this of treatments. to never current to by strong, customers' and, production ongoing than development in actively our therapy supporting vaccine committed relevance

Operator

Peterson line of Tycho Our question JPMorgan. with comes first Instructions] from the [Operator

Tycho Peterson

quarter? tailwinds there to morning. there? could was vaccine should good timing testing if just it the shift it like I'm quarters this quarter the of comment last three mix the wondering on just quarter. you COVID why Michael, moderated that Hey, campaigns? PPE, relative last was assume was that we Is And of in of any Or some

Michael Stubblefield

the morning Tycho. today. for good Thanks joining Yes, call

clinical we've in in we to testing. testing saw basis, the earlier full the July testing moderated we certain continue And tailwinds vaccine quarter won't September. meaningful A supporting somewhat saw in and an part acceleration of of quarter, And an that linked think for into moderation somewhat come portfolio you're supply on an half scale. doses. back and a until Similar and early you're where mentioned treatment. the the what us look there were a And the piece us, of August, to is process doses piece as wasn't that the forward of acceleration approved of endure. in thousands quarter. second way tens a moving said the in developments we as in and PPE, of approval, that But on we relative in for the trials, to the continued tailwinds we summer, been to the Tom's move that the tailwind presumably I the constraints As for of as dynamic at is remarks, billions really but talking elements in of roughly then strong. We've particularly are saw eventual millions obviously quite

we as shift treatment. will move tailwinds approved the of a an into phase So

Tycho Peterson

on end obviously, great strength biopharma, markets, the there. on And then

pharma And any lot And down. bioprocess. we've digits. peers a mid-single last some The talk budgets? XQ of your that kind talked you down You know that's the on to about R&D was heard, I on still overall there your thoughts Can talked R&D the of piece side, equipment revenues?

could any in fourth there is equipment hope the quarter? So recover

Michael Stubblefield

to XX% maybe And in we still a don't the equipment We equipment. second book of the as for that have visibility. third were a into of window lot don't encouraged order saw meaningfully. but relative long accelerate quarter quarter have the kind We off we

move to point the You're way budget a given end you at And year, out, of typically hampered budget didn't the last But say experience about see in really much would some this up remind that just the further visibilities R&D couple last part in here, as does of And even the I'll seen of quarter. It the as to digits high-single is that potential October. correct in year. from can that of business the And improving you, see the we of the of steadily year, what the around Tom to weeks throughout coming October sequentially. is the space month we R&D mid- biopharma. flush. go the third we flush improved pandemic. I environment, appear the acceleration overall, indicated, we've certainly, be into do

Tycho Peterson

hop Okay. on last And then off health before care. I one

You the delays fourth How And second into was additional of any had any sequential swing a of the quarter? there. that thoughts kind huge much of recapture quarter?

Michael Stubblefield

lot A in Yes. momentum health the of space. care

Strong provides standpoint. you're you pointed into have a exposure the in that testing, the double both kind of quarter, the our from labs those supplied more with before. As that obviously, we benefiting were growth customers a pretty are in We that. lot of our service in of them we the to a pick supply labs and reference normalized recovery that of from and seeing COVID. return support we critical a many And COVID business out, that digits we just of, don't well leveraging the to but And not to a return environment supply chain procedure time. successful also the come that associated keep chain security diagnostics hadn't really enjoyed up a were

we the So reflection business of certainly, is of new throughout quarter. piece a wins that had that a

Tom Szlosek

with that elective And Tycho a on environment all -- fairly then procedures. and of tempered all that, delivered still

that forward eventual the as of So we're well. looking to improvement

Tycho Peterson

excellent Right, Thomas.

Michael Stubblefield

Tycho. Thanks

Operator

Kumar Evercore from Your of Vijay next line comes with ISI. question the

Vijay Kumar

a sequential XXXX? print and Was to doubled. perhaps taking -- Hey on line the does on top here. guess, or order good up contribution what you Michael, And perspective book bioproduction congrats maybe guys, or top what Is was thanks mean I comment doubling about for, base? line for year-on-year a a on the think that it when from up? doubling question has that the

Michael Stubblefield

has morning -- to doubled really the Vijay, Yes as the seen order from of good an and you. year, book through hear book that since of beginning good acceleration The we've fourth continued here couple we've the and quarter second into third as quarter. days quarter, reflects and build a the of even we've early the of it's to gone And things. through the it moved

had tremendous is extremely base success is absent majority that years we the effect, business. product We've over and you the investing through in last been business the support, book in several pipeline. this that capabilities the see actually in we've in capabilities, innovation our vaccine the heavily of Firstly, reflected our order base But new business. robust. the technologies base build encouragingly, And moving and

starting approved would in here an phase As I where will I there into some the vaccine. the an quarter more that from mean certainly quarter, visibility last of coming orders any fact to satisfy and year Vijay. at vaccine trial next quarter ultimately, are still the pretty we anticipate just next vaccines mentioned approval the of is COVID-driven we're it isn't terms these that the given in of fourth But But in in what and move us for volume, production. could and into see year, clinical of that book, the as coming commercial that into

things couple being whether of major modalities we're be out. viral be would developed, or to point going One, that mRNA the a I across that vectors. think recombinant proteins, I all are relevant

the So point. that's first

us market. there's things variable an by tried important ultimately second on for are of rate are to that the influenced is the And by vaccines adoption doses of does think articulate dictate like specifically. here. But be The ultimately I it mix approved we from openly obviously this the think any of addressable that standpoint the produced, a We've then point, technologies going what here technology. the lot what means of what's was that variables of number an to are will this market that

that mixed on the moment. data somewhat I think is the at

forward range us into as on There's for would scenarios level obviously revenue specific what out. build we real So they to plan. of you a different give of a makes play it lots it difficult

do opportunity here. for I think the considerable we key is takeaway us see

that to We capacity investments we mobilized as in fulfill orders ensure can the have meet to they that come. through demand

think obviously trends here. encouraged about very we're I the

Tom Szlosek

the the fairly couple I equal. is COVID mix add is Vijay, a this But on single-use is is most the things the customized. Michael high-purity mix of that -- would roughly small. piece between And other open is and And between the that orders, and mentioned our chemicals split that thing of our

offerings So are that this noncancelable. is

the and We we've with them. have commitment from customers, done engineering and formulations work

So continues it's firm. track what like fourth the pretty And to in said, upward Michael it quarter.

Vijay Kumar

free determined Perhaps should primary one strong. I see free did -- here, flows? it's really And mean is free That's recollect -- mean base? cash on about guys. Was I there interest how started, about million off by forward. could sub-XXX. And year, what's the Should the we think mean helpful, start if on the morning. that's flows these timing use I the And cash curious expense this the for I'm I this going the think, any refi cash growing this for flows new any that if $XXX I impact? color be announcement of what year, just we of

Tom Szlosek

Yes. Sure.

million million we the of free itself, cash on with free to $XXX cash the in flow. everybody, Vijay, started just expectation So to $XXX year remind just an flow

the the from deliver the ton able the Act, we some quarter We that a -- of only in that's already to basically some tune that's benefit. the we liabilities, $XXX come forward some overcome million through at than the is Not were payments item But the third defer million. as $XX there that's a we've third to quarter. apart payments were of and unusual tax million really benefit less to able still employer unusual refinancing that the quarter The had million. there, from but in through we and tax interest normally into and actually $XX accelerate in to fourth about are paid that be that would part thing done because yet $XXX only that's CARES

I working three real benefit through capital able growth just the contain working capital. we've that flat So, been mean is about We've despite the quarters to in delivered. to

fact, reduced we capital actually or by to working third the X.X% quarter, saw, In as we you sales, million. And $XX in grew so. yet, close

mostly that's, reflective of think, operational. So I

think I going that will done be I helpful. refinancings we've forward, think the

I'm give As you're to it. aware on we'll get because -- the everybody sure an on update and questions process, just refinancing

billion $X $X of billion about July. refinanced that We $X debt of outstanding. have We billion in

you As borrowings the pretax to and X.X%, reduced know, to we from annual $X those going rate that's savings. to of on close about be million X%

As fourth I the earnest, in quarter. starts to in that in, kick said,

of what market pretty On in it. the that secured, remaining term repriced $X $X we're XXX. plus billion LIBOR with We about happy is. February. loans. below in billion our of That's It's That's today's

got X.XX. and better can the rating, an flows look rate billion security we is bond and So two cash given It's in of our about effective that the so there's no than capital remaining $X believe much tranches our if you prepayment of penalty, we our structure, that improvement prefer keep debt financing. do forth. at continued We to one in The place. that

also with we going refinance term sources. we it And when loans and of to uses the process announced time, a with to bonds. We well. the process and uses do loan a Friday. more morning We were launched had bond because was this articulated bond the the came it clear we at term And that expect combination pretty on as sources clear than

as have last we want takes to Friday. for normally the long bond on process way, is process release. That's a started The the And by there what all a loan week. term the information the earnings out We QX that's bit faster. So, as why possible. accelerated we

we I since that say billion position accept We've has $X loan. in, to from building will dealing the by is as week. on choppy turned little so the all but pricing a got got whatsoever interest anything both be strong. to We've in of investor a the far requirement bit The the I end launched, no expect of know, strength. market term we're see you that So suboptimal. will the

expect at to decision the a of point We week. end the have

of the XXX do meaningful kind that to you if the can $X math billion, effectively would on or the so, on sorry, reduce savings. be X% -- that X.XX but You can

So, we'll update everybody process. once we're the through

Vijay Kumar

It's helpful detail. you. Thank

Operator

comes Your the next of Patrick with line Citi. question from Donnelly

Patrick Donnelly

follow Maybe there. guys. on one up to thanks Vijay's of Great, just

are able had terms what couple there the 'XX. XXXX hard book hard talk your in bioproduction doubling, to about magnitude of in talk going there XXXX numbers you of versus We to burn and is peers the about give percent sorry, numbers? On versus a --

size it. the there how take you slip there more color vaccines terms again, little And from maybe commercial, does So trending just of then about to off that in the the really see it book? if revenue you're Michael, a these talk is wondering, once raw just able --

Michael Stubblefield

Yes. to book, the is that of mean, the Good this numbers of part back the probably that's And have couple a we've question. would of there's look, sit the lot as here an from at we're we one of least months that part elements hear this of business. with demand we that you. talked roughly momentum I Thanks order revenue year's into of book an about. a in in in the now or lengthened full a And we ahead. Typically, the order well obviously, business, in to this see, book starting for book, of order here year. order would today, half next see

will to various it very take on ultimately mix would which that, the to what factors back looks approved. dictate a that obviously like vaccine, get end is I So, Relative you back it of the meaningful. technologies of very, here

modalities, mix going here. material on to how society And modalities you prevail approval, ramp through is or on be and again, one it's the will approval requirements probably thing materials. adopt major I our and the that vaccines of As view than they here customers they of how start to lastly, quickly a driver quickly will these how have out, to of but production going can And there think risk different point capacity four then a them more ultimately are materials, which there'll that production starting adopt pulling to one you is the our depending full if on our coming are are be know, year we're which to the these that into on and customized will raw the commitments of investing kind the or is quickly trial going ultimately point, then nature would fulfill make later getting some we're be And that given at obviously here. lead mentioned, moving delivery Tom materials have orders that. as given level, these rapid first see at from quarter at clinical this pretty this once we to and approvals. be we're already And to the time at dictate this But are for that of the point ramp those. the orders greatly as

continue vaccines issued, to So on the we'll new get closely. we'll follow it approvals obviously, respond as accordingly. And

Patrick Donnelly

thanks. Michael, And obviously here. on great the margin year-to-date, pretty quarter helpful, That's expansion here side, maybe, Tom, just compelling been

the how profile... margin if As we some higher, should we're profile ahead tailwinds you like business. wondering the it carry But of think to the just margin that about about if Again, about core revenue? just the in about you right, than that bioproduction it profile talk thinking higher-margin feels if should inflects of could look talked those that just book, we

Tom Szlosek

a From at EBITDA rate Yes, -- perspective, endeavored rate. we've times grow know, you X.X X we've absolutely. to to growth I as mean the sales longer-term Patrick, a margin our of

is So sales X%. growing

the business to have right, parts variable portfolio. biopharma at the the some production if margin would of be not be growing expect X.X between does on other We the the profile The XX. of more mix. you're EBITDA than least attractive big two side, And

gross do I'm not XX%. be with those meaningfully XX%. to that I shorter-term the And XX% planning a we'll XXXX to accretive I roughly that is mind. in a XXX -- basis had in growth orders fourth is but want it remind really year, this So, double, XX%, outsized said. margin open points, of as from everybody, is to saying margin last quarter we our perspective,

the attractive we'll to and start hopefully, are we'll of for fourth we can first longer offset margin strong term some beyond. come I that we start quarter facing. as and headwinds quarter, products in we're maybe So finish see But better very profiles these it through, going impact. very, as And overall, think out to see of some these mix

Patrick Donnelly

thanks That sounds good, Tom.

Operator

Doug of Schenkel line the from comes with question next Your Cowen.

Ryan Blicker

for Ryan taking Hi this questions. is on Doug. my Thanks for

Tom Szlosek

morning. good All right,

Ryan Blicker

you the Good moving QX? activity continued the in activity in in face morning, about talk to Europe. customer due Have of starting pause levels any Europe expect you across Can business COVID recently on core in seen forward? maybe improvement Or early you improvement do flare-ups?

Michael Stubblefield

lot third us more again see able launched demand, workflows obviously, that has new portfolio products job reflected more team COVID products all addressing. a that solutions. meeting Europe that done in And growth. We've there of this and these in strong those and than has year. an in Europe you X% been to really the our numbers team amazing of year, and being The saw the year, been bright XX,XXX what than with a you to with supplementing quarter supplement many we're has out deliver for spot this

into that through moved of a was the we or return sector. -- bigger of we changes probably saw As quarter, the the one third academic

Europe Tom's a the in and there we maybe off the think lot business to fourth start obviously, part as and improvement if a as returned another strong of whatever this obviously to quarter we he Momentum across X,XXX-point here into there's here. in of remarks, you want quarter. concern of continues in of to But in aware, of we're the refer flattish, to that first wave the somewhat we is of in kind pandemic, very I the are performance it will. the referenced month seems were I back extreme where back think as this place are with is the instituted that things playing to measures. the more April. phone well, continental lockdown-type the trend have go Europe certain team just measures and was U.S. I this limited in put countries in understand morning lockdown we're the at on see out And general regarding at, moment. to appetite where March that to pandemic, the be the aware spread of to

doing around here today, see performance bars And third we we at at we've and things prudent think remain not gyms moment, we're think But I such. restaurants the limiting that a crowd the open. masks continue sit quarter. rollback from experienced where and I as and universities of in to size the they're anticipating, and

Ryan Blicker

follow-up just on bioproduction it, explicitly. more maybe Got and then a

So revenue is greater XX% up in or up quarter than the XXX%.

level up Given sustained at significant at you vaccine haven't accelerate even had XXXX? any given to meaningful XX do contributions over growth scale in the expect and vaccine current it could bioproduction least expected Or next production revenue in be the in you months, in XX% XXXX? faster the yet

Michael Stubblefield

we Hard extent the that be will and do that obviously approvals That in we impacted platform see part the has single to been is described that's R&D for ramp-up growing digits last what absent the I've And ultimately, the certainly can us we're that The business. say as ceiling other to last and be, for strong us end growth for better growing. favorably come part certainly that which any production we is that platform and double accelerate an adoption continue variables going growth work of confident, through. years, couple But will been platform impact vaccine of here. the our only biopharma to vaccine. high market Well, already portion vaccine, on has even digits the of it and to from over growth bioproduction approvals in that several that absent the continuing, years. then momentum growing that double-digit offering, that a given by has the the any And see of been here.

Ryan Blicker

to bit over that COVID for rapid be those Okay, and the Or you incremental diagnostic rapid is quarters? diagnostic I seen of tailwinds over testing how date? talk to sneak test meaningfully that COVID antigen any and largely of manufacturing if more the Avantor to couple benefit Can next within antigen a you your exposure few could one those Have your scale? as antigens you. Thank in. about meaningful could quarters to next from tailwinds

Michael Stubblefield

third Yes, fourth to question. limited are the quarter we early testing. very of starting some that's But great in impact here. the In see a days quarter that upside from the from the antigen-based results,

to exposure on Just here group maybe take the step a our broadly. and testing remind back

all there. we've the think types of become I that experts are on out three tests

two kind testing, continues the to versions be gold molecular antigen-based have the of You testing, PCR the standard. of which

strong, well that we workflow that and to precedes us, We're platform has see itself. the it the has to very the that that probably prep positioned the driven support For been continuing. most actual tailwinds. date, been sample test And has

rapid The referring tests. antigen-based other test that these you're more is to

then tests quarter well have partners, platform we to is tests the that the that marketplace. distribute for capabilities third-party order those will that manufacturers and fourth we will that of really of supply testing on our quite have themselves. And chain as OEM as workflow. access tests, play element source meaningful the and as piece provide to content to testing solution. where we a We've approved got serological certain will a we the we book that's We here last access into developing the in And the the both from

relatively stronger around the I tracks adoption today. for think those we've be seen that the world think been it And expected I than was has to muted upside the that tests.

tailwinds forward, of of So with I in fourth least are testing. look momentum quarter I'd of we these the in summarize at And associated continued some saying antigen-based think encouraged as early here, it the days uptake we by by tests. PCR the

Operator

Your question comes with from Bank Ryskin Michael next the of America. of line

Michael Ryskin

some Derik. to landscape This thanks. for XQ underlying sort on ex to COVID. back Hey, is looking Mike want at of I performance, the of go the

had in just you we think comps given a the easy bit stronger expecting quarter year-over-year. performance the I were little

year. one you've was 'XX all XQ think the of easiest I comps seen

again, deeper in go XQ little thinking forward you that comp you wondering I'm you XQ sort at a of So COVID. on tougher get because, you into your go adjusted and improvement the the as to it in if frames could of XQ an how ex bit base if business, sequential just into basis a look

Michael Stubblefield

the question. for thanks Yes,

tailwinds. point, If were points basis you the quarter roughly we XXX look of business. performance base to a XXX maybe And our by the as COVID basis at decline XXX starting saw in in then point aided roughly to we second XXX

to second point improved anchoring business sequentially an of points. kind base you, for the as quarter third X,XXX So basis from nearly by quarter

obviously, capacity have quarter. the high-single in early days business, to encouraging tailwinds that see you hit quarter roughly I In of most. that's the excited the And that as government So from at these been in is strong, one the the carry a all one say and that's growth in second strong of we into quarter. mid- read to very the biopharma And the it on we've platform piece recovered me part through third utilization flow. about the very, expansion improvement things and our the saw Americas. probably we're were been would Europe. revenue, obviously, supporting. you in unaided of a COVID quarter and has in digits quarter. sequential of look XX% by the margin It We the third space, and the portfolio was lot in if our when here, the I market digits single in to of seen perspective, the down described. growing performance education was of the But the the government and most been an numbers low end overall we've business in and programs education XX% fourth cash R&D has down been substantially by, of second quarter, But driven piece business flat quarter the the That base that pieces the

our which business. quarter. to business XXXX really And all us. anticipate a so, business, much in the reference care I more labs But across recovery in to a come there's elective a that don't be acceleration still campuses fourth still recovery procedure-driven a the that obviously our we well K-XX business, bit portion of full ultimately an there, schools of have our headwinds event. recovery as that's continues We've of U.S. nice business, biomaterials the we reopening hospital of bright probably to in spot And a in part the think here in big reopening particularly going of in seen that's Health for the of take as and a the

That going And business half business, I that piece the of we've not that think part shocks So of well. business. has some of and up some subject still, of headroom our be seen. to roughly there that on necessarily piece the to then the oriented of held to defensive rather macro in applied very the is go

single other of sequential down which -- PMIs still low is for The digits modestly It's more moved have business but recovery us roughly the the above seen linked well. we've up and XX% some part that quarter. to obviously as in PMI, recent has XX held

So nice as into the quarter, that's third a and month carried the some with we fourth seems the into momentum of And move markets. the to end we October. how obviously, have little quarter it see we ended

Michael Ryskin

Great, thanks. follow-up And a the flow refinance. and debt cash quick on from me the free

getting debt on the have got six year, a the did burden at debt what long-term months or year-to-date, free recognize the lighter would than certainly flow cash strong is earlier now you you look still targets year I thought and going got you maybe ago. you've this a something? the you If term, lot is the of down of bit two flexibility a bit still leverage. do more you does give this ourselves? little again? you Or near Do to start more to to and before But out go active getting further ahead little in a that it X want get times you

Tom Szlosek

to I right XXXX you're was is times we Michael. the question, started mean X. along that leverage. within -- I on great think wanted since This two said of comfortably Yes, Tom. we be all out operating our north there. IPO what to Yes, We X point

the to year. this with help that an We working their down worked we've us, strength opportunities actually of pipeline strategy the M&A but the business develop we've understand Mark beneath be are them we though, centrally a we has each strategy and brought that that not with leader. global four are program there. or at to in up what our out of mean units do a And in given been year, with only business at our X.X expect started the and magical of the even not point beginning link have that I the the so, to end for the today. the That's performance. And from by perspective.

offerings. X% months in revenue, wouldn't processes, X% maybe So which couple small I but next near anxious might our I the expect think at or we've actually maybe looking but things would the our then today. us at biopharma some out broad even positions the I trying -- in next we knows, look so, round six we're we're we're do or going. mean who of on term, a to of But sort workflow in -- going places businesses. be you lab a available participated production core be year, really get we'll rather forward, our anything And that acquisitions, funnel tuck-in-type see like not that in tuck-ins, looking I for would to probably focus to mean of of to of

you idea. would so transformational That's say what a kind be doing are bit And of that let's than, tuck-in massive or we're of variety larger expect looking little us to deals a at. a more

Michael Ryskin

That's really helpful. Thanks so much guys.

Operator

Brandon next with Couillard of Your the comes from question Jefferies. line

Brandon Couillard

Hey, thanks. Good morning.

Tom Szlosek

Morning.

Brandon Couillard

two a for part Tom. question you, Just

quarter? with margin Is as was of looks fourth the of tax third a that a on progress as any Looking inventory like kind about quarter. there basis the us then Q, in far for through gross line point the charge goalpost nice gross And your share XX And in dynamic? kind it you rate. margin outlook onetime the can

bring that you curious further down room into to mid-term. even Just to the more see near XXs extent might low what to

Tom Szlosek

great Yes, Brandon. questions,

take the me first Let one.

margin better got and a versus about, we've important pretty of with growth of been initiatives I gross as are margin then COVID cost number focus. this inflation and got, had rates, cost dynamic. discretionary We've that in improvement. the has spend proprietary driving management mean of environment. that really mix, talked have the a price obviously, including a containment initiatives productivity area favorable we've driving We good We've

are basis points. Our up year-to-date XX XX.X% margins to We gross XX.X%. went from

In mix, The in noncash the we in was mentioned, you One third but drivers all the adjustments the However, to things gross as point little And is in supply, bit protective were which been adjustments we have abnormally equipment, inflation gloves personal the to couple to some leading unprecedented of quarter place, like experiencing a price, was our basically high forth. and the inventory in in so Americas. the nonrecurring I we're areas. had and particular, there's reflect so did inflation in overwhelming that purchased LIFO less than We apparel a that demand the certain the LIFO-related. out, for that. inventory productivity, make quarter. materials, margin accounting follow is rate

to policy inventory that sold of our environment. at following accounting the and so just LIFO cost dynamic goods reflect just in the in prices. older current That's leave And the inflationary an a was of prices accounting

gotten second some distribution in we that The point, inventories us. we've had some cleanup behind

expect them impact certainly have quarter, of these in both to don't For not I things, XXXX. any fourth the going forward into

Operator

Dan the UBS. Your next line question comes of with from Brennan

Tom Szlosek

the Brandon's on point I Dan, tax apologize to question on get I I question, Dan. two before rate. get Hey, to for Yes. your didn't that.

year, go businesses inefficiencies we're in the we that guidance better XX some rate. internationally. in if is as the of at around had at a tax year. articulated you've of start mid-XXs the our So to roughly than now XX% expecting end adjusted at had some way pre-IPO, We're the which you back tax tax of to provided plan we north were we through rate, of those -- we've work the that our largely seen, a And the -- beginning down for full time, removal lower the financed XX% rate of of the efforts. is to And through the

is European more our like the particular, way So good progress Yes, the businesses continent. there. in whole Europe places Central or opportunity, in in we in there operate

initiatives been place, to we've get as like traction so the the time can or the probably continue been, has on are in to tax that sorry, to would them longer two think rate pretty good itself. part work to into be -- cash the got that we or has factor XX a I'd with so of implementation the I And some tax lead modeling. approaching initiatives. that going it a way They're drive rate short-term take into the But year down.

for tax with thinking impacts wildcard like all we've -- The us. the this. and how of that you So the election overall, that continue rates got tax and to one is are planning

Dan Brennan

did could the that comments that? Sure, -- a down be one comment, what implied October just versus the base mid-single, high -- break give in the QX for single, maybe you COVID sense thanks Great, would on question between you or on

Michael Stubblefield

we No, not. did

Tom Szlosek

tailwinds that, I can Michael as And the variability it. some to of have mean expect COVID would I said, mix -- the

The as for to second in really the of was said. was testing, a the some We types. different diagnostic to testing strong serological the basis XXX points. quarter benefit referencing Michael lot the testing And we XXX contributed second from that the quarter had

is volumes the third head just tail have it off But into the we quarter, As some because fourth mean testing third overall market in the saw good order you of We a bit as I quarter. the of same look of token, by mix quarter. piece at the activity the what using. serological end in the increased fell the

little production bit move a The more has So, diagnostics we biopharma to expect of mix it the that side. strong. really on been back to of kind piece

say dynamics. what it's somewhere to expect precise the QX But range would I in to in those the QX somewhere So, of kind exact be. tailwinds hard would

Dan Brennan

I different hoping was series the But modalities. did sizing extensive -- therapeutic a positioning on then for you opportunity on, one there's analysis opportunity. questions you And guys that. more and the provide since I been a in the there Great, pretty vaccine your follow-up thank of obviously, know across competitive

a think that see, part be of for of kind QX, to certainly what granted maybe wide different range sounds but in mean it that the range a 'XX, upon outlook there's order a or some you book way with in outcomes frame XX maybe just your so -- could I it a of quick like there's bps business outcomes, was math. based I is modalities. the -- XXXX, doing maybe So range would of of

and wondering could to your I one a more us look maybe way just So to the for given going the analysis extensive you've outcomes if was done business, forward. just think it what like -- anyway, to of there's another importance shot, through of range that

Michael Stubblefield

empathize making we for can the investments really that the this in maximize believe ensure opportunity the business. for in we're thanks your that model trying we're that time could and to tremendous the to with question. Yes, what And here. trying us, Certainly amount to understand mean can spending reflect interest a of

found I kind take best it to impact the think far the market. describe is back the the so way on that to business to of potential we impact addressable

remind those and on -- on we market candidates business I or on that's what the our market that end, projected you, available high information call requirements it we So, the And at in end. participate for looking million material million million roughly we have on this to increase raw can each that then single-use and technologies, addressable or the could based from the $XX think technologies $X $X and doses are from, a the portfolio. to $X in in based -- vaccine bioproduction on million pipeline our based of our anywhere that those million on on the publicly up the low depending those in be candidates, produced for $X requirements

marked of business. So anticipate impact range a a at -- But you can see it's on good having our a addressable the for market on will pretty minimum, outcomes. it a pretty we it -- on least

Operator

any gentlemen, time conference I and to like for or Stubblefield we've to for additional closing reached the now allotted turn the Michael over remarks. questions. Ladies would

Michael Stubblefield

of in Yes. the being call late and flexible for our thank timing on the you Thank all operator, with participating and the for again call. today shift you,

for who express Their of forward about more. quarter. updating then, And mattered of our living be actively close, you end and we continued for associates, time. motion everyone. take admiration world working Thank this values As mission inspiration. unprecedented my and during it's just gratitude the our I lies setting support truly and all global to every ahead passion excited a fourth Truly, global Avantor our of until dedication our at to day create wanted are never has what the in better care looking and to all well, an to tirelessly I'm customers and to science you. of

Operator

call. Thank you in for participating conference today's

now at lines may You your time. disconnect this

Avantor (AVTR) 29 Oct 202020 Q3 Earnings call transcript