AVTR - Earnings call transcript Q4 2020

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Operator

Good afternoon. My name is Grace and I will your conference operator today. At this time, I would like to welcome everyone to Avantor’s Fourth Quarter and Full-Year 2020 Earnings Results 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. now of call Investor will Thomas, to I President Vice Relations. Instructions] turn over the Tommy [Operator Mr. Thomas, you may begin the conference.

Tommy Thomas

Thank call. afternoon us you, everyone. Thank you good operator, for on today's and joining

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

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

Michael Stubblefield

have good substantially, and of are XXXX, is afternoon and for in VWR you we everyone. families start undergone transformation your you and target two as significant XXXX has and clear. never off has Tommy hope this you. staying This a space. and to I margins leader has growth the today more on the healthy. appreciate our Thanks, new has Organic value times also sciences leverage serve since doubled, I times of exciting a that our year profitability life increased time acquiring and hope to EBITDA. there is the four positioned Avantor been now have transformation global us a reached overall joining good Reflecting to business range

virtually serve. scale production shown important As on is every Slide most and here deeply in of up, X, we industries in research, the Avantor embedded stage activities

customers research. and that is in to a early our activities, need conduct Our providing as phase we in model discovery supporting all grounded serve shop their one-stop they scientists

to centric Our provide applications. solutions demanding become content work that model to innovation ultimately customer the we access see us early most some stage our solutions customers of leverage and into specified And platforms. our to production for enables the approved

across business us XXXX. journey an revenue several was to enables an customer’s dimensions. step element Avantor’s that is integrated fully Slide of the demonstrated Our model of overview Resiliency every way. model throughout provides of X business support our our

enabling third similar and recurring including These and services. than Our end customers. our products consumables products resiliency revenue Approximately oversight, attractive revenue markets, high our serve We characteristics highly that regulatory complex partners, our supplemented revenue the proprietary end XX% workflow science comprehensive provide driven the feature supplier is life development of more of to stems processes. Approximately including billion four in bioproduction $X are from us branded and from comes in our markets solutions space. to portfolio, nature by driven proprietary base. offerings of our half innovative from critical our party

hubs like our have growing have presence region, by the and core in Korea, a ongoing driven and and Europe Singapore, EMEA biopharma China. leading in positions We investments the Americas in

X, to to Moving highlights Slide quarter. share some fourth the want from I

strongest we organic business rate generation, growth month, with last our solid our and of execute of XX.X%, the of QX ended a and cash and pre-announced relevance value results ability the a quarter margin environment. underscore model our year. our growth challenging flow expansion team's As strong in XXXX Combined with to

with enhanced programming financial In our media several and business. consistency growth offering also buffer addition the and enables quarter, our launches mixing reproducibility results, driving processes. to across generating through Avantor remain single strong focused use core technology on we innovation in and integrated bioproduction system formulation during mixing We TopMixer our

it of biopharma pressure single process making with pressures offering. our Our suitable SterilEnz and technologies up conditions. use for sustains the single system temperatures handling XXX where our elevated, to are line complementing of Both solutions, full customer range high-pressure applications extending psi, and are normal use fluid exceed compatible

technology During continuously leverages to silicone delivery that biomaterials application anti-HIV our drug. purity received prevention for the high quarter, commercialized business our The has Agency. controlled flexible, release release Medicines positive a HIV drug a opinion from European technology an the a

are affected HIV geographies options the We those epidemic. of in expanding most by women, in our the proud prevention particularly to HIV role available

by We cost of high the debt. portions the of also transformation our completed our refinancing capital structure remaining

will that financial of Over will forward This $XXX the portfolio M&A COVID-XX pandemic. our our opportunities our the to Avantor have of last and cost us offerings. couple accelerate expense of important going debt proprietary enhance growth and the million. reduced nearly flexibility cut over interest in partner pursue significant by against fight years, remains XX% give positions us average an weighted we and by

viral several countries the vaccine addition emergency In the in offer, testing use mRNA the around authorization we modalities, PPE solutions already we including that in to received and all have and modalities world. vector relevant are

and needs. to manufacturing appropriate our critical bioproduction meet growing We capacity room investments clean continue increase to make production to the

material North raw manufacturing the our facility key summer. fourth The plans our quarter, site capacity, additional first Massachusetts be year. clean products to with in room bring ready online throughout We're capacity the expansion capacity to we by in our came for and to Carolina working expect online at also the increase additional

team the of some our commercialized example silicone the business of innovation the low critical our This solve fluid leveraging customer portfolio the our COVID-XX support breadth of challenges. and a vaccines. transfer good of elastomer extremely to at value production of recently requirement is to integrated model, a temperatures, a Additionally, highlights in

once government healthcare, procedure was we importantly, In strong outstanding collaborate to quarter directly to our $X.XX. characterize our Performance with of ongoing and weakness. and indicative COVID-related share driven by points mid-to-high to scale Growth Turning was COVID-XX as growth improvements by an through X our ability to again activity. our the in be up and I'd their tailwinds, summarize points revenue Biopharma’s of XX% the strength growth value and XX.X%, presentation, of double-digit earnings experienced adjusted or customers results. to It offset in growth in up clinical is impacted favorably Slide elected broad-based XXX like financial approximately increased to basis approximately quarter revenues reference organic base markets. continues of business. hospital we formulations. we basis all That XX%. lab biopharma by related Organic EBITDA in growth quarter end-markets, QX in exceeded leading were XXX approximately XX% driven to single-digit exceeded per the offer purchases. our reflecting the to Adjusted XX%

Tom from reflect impact minutes. proprietary in our details on provide productivity. and continues few EBITDA to of EPS growth a EBITDA mix Our leverage, excellence, favorable rate just the volume and offerings, commercial more will adjusted growth margin

Our strong free XXX% cash adjusted conversion generation of drove flow net income.

lower the higher generated in X by cash to beginning EBITDA, net than we down high-end of times and X.X XX% interest full-year flow, about leverage free full-year, growth times This times target from the XXXX range X and year. guidance, performance reach at aided EBITDA the of our taxes. million XXX the of our initial For enabled to strong

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

Tom Szlosek

organic Michael drove Biopharma XX% growth workflows representing products business. organic revenue quarter, afternoon shows full-year. and of the growth everyone. our X R&D Strengthening approximately our product and for of quarter. trends for revenue the in Thank growth the good in XX% by you, lab and end-market group Slide in over our growth revenue experienced double-digit

group, mid-single-digits ongoing education declined experienced full-year. full-year. market, the strong revenue In industries the COVID growth and was including by impacted in materials, proprietary in bioproduction approximately in areas. was the the consumables driven gas, government, again declined once experienced business. double-digit product in Strength declines continued and the elective XX% by fourth approximately ongoing portion momentum growth medical technologies of very end and driven which the and in petrochemicals business approximately sequential Fourth growth the base the adversely organic oil which low-single-digits strong America. Advanced our and fourth XX% procedure offset materials our offset representing Americas. platform By and both representing for revenues centered growth this by quarter, industrials with support revenue revenue core and The organic addition, and Education revenue, in weakness, quarter, XX% materials implants by increased experienced attain testing in mid-single-digit our & customer our applied approximately production low-single-digit experienced COVID-related revenue quarter growth revenue represents purchases growth of for and government growth, XX% to XX% also single our fourth quarter, organically our improvement. used mining of driven the Healthcare, assemblies of over full-year. has

high increased continuing recovery ongoing continued by and low-single-digit investment. as experienced a driven teens procurement Third party and sites also high-single-digits to growth. strength reflecting experienced improvement strong materials sequential growth, and modest Equipment instrumentation a clinical Services very equipment CapEx specialty services services to consumables in organic reopen. and

move Slide to me X. Let

biopharma which lab a clinical Full-year moderated in of creating customers revenue XX% strong improvement to are school growth our continues was Most lab in declines approximately growth end-markets Americas, sequential at regional which of and greater experienced improvement biopharma, implants from strong procedure global perspective, represents XX.X% hospital including quarter. still double-digit QX production, growth in offsetting headwind. organic growth XX% X.X%. growth growth and from by Looking than and closures sales, driven medical The a growth although in impact Highlights the growth business. weakness, in elective XX% X%. education reported and were ongoing healthcare reference of sequential

QX. personal COVID-related was highlighted X% margin and and our and proprietary double-digits. lab purchasing. XX.X% overall grew sales materials biopharma sales, around cost production reported consumables experience an X.X%. in testing Americas, XX basis the business government sequential in content period. rate, challenging organic both growth basis as approximately reopening. improvement the organic from continued government XXXX, Government's aided by representing doubling the in broad-based include and the Similar sequential results. driven growth sales care protective expanded EBITDA lower XX%. XXX QX by of XX.X% XX.X% driven has quarter our the growth. in EMEA by and growth with volume EBITDA XX% despite growth. over the Europe when biopharma reported strong technologies strength improvement, points favorable and of basis biopharma strong All full-year diagnostic grew drivers research adjusted X.X% period. essentially equipment, first education prior margin largely end-market sales, materials Health adjusted points and growth biopharma support growth excellence, continuing Key Europe, ongoing strong very America's purchases, as growth, to drove XXXX additional Americas. EBITDA to adjusted ongoing the points rate, Advanced margin was a revenue consumables Our experienced approximately growth growth, comparable as in COVID-related compared prior mid-single-digits; by approximately which digits. by represents XXX approximately strong growth double-digit year mix global by EMEA prior grew compared production in Slide to global end-markets commercial Full-year reported approximately by single X segment revenue reported strong, strength offerings. the drove and their low in centered to by higher, growth offset

period. the to We created continue support margin volume to strong along non-recurring impacts however, some commercial growth additional excellence. with margin In the experience rate items growth the favorable from quarter, and some investments margin basis Europe. to EBITDA EBITDA basis points points approximately reported XXXX prior XX.X% lower expanded EMEA XX margin XXX as adjusted adjusted full-year decline. a in rate, approximately compared the has

in margin As adjusted EBITDA you'll EBITDA biopharma XXXX growth an rate had basis exceptionally margin same by this we due factor. full-year XXXX EMEA in in QX XXX recall, strong production end-market. points declined EMEA approximately very driven in adjusted the strong our to

growth of growth XX, and We achieved expansion. were our performance containment, biopharma XX XX% favorable growth, Slide excellence quarter in by costs, performance. in drivers cost and the adjusted by let with EBITDA. our margin of adjusted discretionary basis commercial including strong continued approximately production increased volume mix, driven to proprietary strong points offset Turning me reported compensation start EBITDA fourth reported and Key offerings,

approximately per share the and the the approximately earnings adjusted expanded full-year. income our our full-year approximately achieved points. tax in and rate. in We ongoing the XX% for share from de for operating the expense leveraging For were adjusted our refinancing Primary EBITDA in per strong drivers interest XX margin improvement the basis performance, earnings and adjusted reduction growth XX% growth quarter, in

$XXX quarter. cash higher high-end of leverage cash and guidance. was with The interest capital, fourth Full-year flow was of withdrawn driven growth our As almost EBITDA, a outstanding previously $XXX the million Michael the mentioned, we free free quarter of lower generation payments. in generation, higher million, flow million and by working tax than XXX had strong

may the uncertainties extraordinary to and withdrew Slide volatility pandemic. our XX, recall Turning we the XXXX by due that global guidance earnings to created you

utilization, pandemic Although starting to lab shape, adoption. is and to diagnostic resolving uncertainty production, remains a significant and take the testing vaccine path distribution volumes, with

cash medical preliminary profits, In it XXXX. provide is addition, extremely still industrial operating for free revenues, full our and uncertainties we to an plan to businesses construct for unclear. Nevertheless, implants, flow. recovery for the challenging education, some path do perspectives These make and

you the update on during full-year guidance earnings each call. quarter's will We

the we baseline significantly second impact the points even the grew points tailwinds, core XXX growth revenue of XXX and reasonable Excluding into be for business consider core approximately becomes We we basis the to a mid-single-digit our as XXXX. comparison COVID rate, quarter, it year-over-year the should basis as easier. new in higher run where start year, move a

the core of fourth half business, are plus, However, XXX to U.S. year. growth X% particularly with prior as more head to XX% year. for approximately we XXXX, planning growth for our million of year into on year, potential the including currently a mid-to-high to range will X% first XXX the for outlook and the weaker dollar half organic become million will Reported the COVID-XX this periods the comparable of we the of single-digit were reflect X% into growth the Based and second challenging. for together tailwind quarter, a

Our to strong preliminary for results that suggest we off are January to a start XXXX.

XX and We XX%. costs be our of adjusted interest re-pricing actions, This expect our completed expectation and impacts adjusted like entertainment EBITDA effective margin the of the XX%. subsides to over of fixed improve employee an de-leveraging, on points. growth and by and continued as leverage the share basis certain of growth and productivity. of rate focus the refinancing from healthcare, operating improvement, will base, continued approximately return We inflation, latter proprietary year. operating anticipate pandemic half managing about lower operational improvement tax our There likely travel expense cost strong This per earnings ongoing offerings, strong and reflects reflects on of and

my re-pricing also Michael. the and Last, the organic This expect lower growth a share for from We higher year is back over related de-leveraging XXXX. taxes refinancing capital count cash will already purposes. also non-recurring investments XXXX benefits, subside continued in I guidance to working performance, now certain and to call We XXXX, to expected million income CapEx operational free to during do prepared be strong and support remarks. maintain hand and mainly in concludes our $XXX approximately interest reflecting for $XXX completed flat the million to payments versus actions. flow

Michael Stubblefield

well as environment. model. on recurring per position biopharma broad the our growth markets we and critical top The base, highly our reflect earnings attractive on we exposure continued extremely head XXXX. outstanding of line share strong and like revenue performance, challenging executed and value end us Reflecting to XXXX, well a EBITDA, resiliency into our And portfolio, mission business adjusted product for generation of cash

have life to and the continues, the to growth our of bioproduction this our industry. has has testing now long-term vaccines the optimistic capture our support. in about and personal strong in exciting thank to society, Reflecting resources endeavor, are a want and serve The for produce remain head our services and equipment, COVID-XX and therapies. on ongoing the we relevance strong, uncertainty future. Avantor order critical toe steadfast solutions Avantor our sciences call. answer to associated and turn of actively your to this we COVID-XX our in workflows, pandemic and begin has critical remains business There to the in and and opportunities protective role support over focus providing experience strategy, investing importance science We question and to customized capitalize to your book interest materials current the the to our you for scale opportunity. with driving our continues While I are growth been the never will needed to underscored embraced time portion this operator space. more our investment and pandemic on I in it executing to

Operator

Your the from JPMorgan. from line Peterson question [Operator comes first of Tycho you. Thank Instructions]

open. Your line is

Tycho Peterson

get or for could think it curious above? numbers, Hey, could know demand, utilization, healthcare or about outlook, durability and you just know you to you high-end you of [indiscernible] more maybe thanks. would COVID additional when approvals to organic just conservatism the maybe the and a COVID you number year, X% X% vaccine see if tailwinds, variables Michael, what talk the to be where you the you wondering you non-COVID trends guidance out vaccine laid I'm the of based noted as

Michael Stubblefield

joining the Thanks call. the Thanks question. for Yeah. Appreciate Tycho.

we at guidance, key components. two kind look constructed of we how As there's the have obviously

take you revenues view the on flow So, business our COVID-XX-related then will obviously and on perform have perspective year. to will the base trying how the how a throughout

So, detail to unpack each let in some of try those here. me you for

roughly to mid-single-digit mentioned as his base X% somewhere the we XXXX remarks, X% For for we're XXXX. in business, the grew in full-year levels Tom and estimating in

we're we continued finished end improvement we've we we're all where QX, do in headwinds And momentum our key of facing. look year-over-year. some But markets. some at still definitely if seen obviously, assuming So, that sequential have we

is business flattish down. education modestly Our to still

business science pre-COVID still industrial most going below those need And those and think some pandemic medical effects somewhat business things we're Our markets, growing. to levels. for our of still of And to subside headwinds it. is the have to end would the before anticipate we see I

the would in quarter the in will testing likely in the vaccine off off have in second the one year. although be assumption. our strong to we're And into And are and mix here that anticipating the that's significant quarter, key marketplace that to of we now somewhat around anticipate becomes generated the out to from think here in assumption XXXX the do second under with perspective, that of number somewhat year Obviously, a prevalent vaccine half and then the first baked be gates we the or testing have vaccine candidates the the assumption second more while of scale here biopharma level, obviously production. particularly decline demand as important more of weight the We rates is on XXXX we full would that environment start same in focus the trailing a more somewhere So, half transmission for the that in going I momentum in an and tailwinds continued R&D platform, in here. that the compared strong fall different. that opportunities

to then, from another. book in more And many that's than read-on. There're And testing, there numbers vaccine, some I here side to and doses ramping the book order or that, have of course, the at the from And were time, we we're provide you produced, revenues here taken there are to trying modalities push get at I assumption that on of around If take we're if is book. think many probably conference you moment, get side at, could lot some that that order play to business relevant and based vaccines which but supplies I other your that moment could the approved. other the theoretically commercialized momentum try key range. to think our the how the one that the the our our know produced, order the coming the we assumptions high obviously prudent very providing a we're with then, get the over across and out get we've grow And variables to in providing some or levels the book could to outlook variables at in our how of obviously one talked push to have the be us way of forums, we're we've some the moment. – modalities would here a obviously order nice say as see an continue recognizing were here. momentum could a all to obviously so to some hand upside approach and is hang

Tycho Peterson

our the the in you I think XXX margins, follow-up points for If January. at basis think basis about Thanks. to basis I had points, then points XX Tom, And a XX conference said

year? So, more can something then, $XX the bit for or inventory, that the the else? clarify you non-cash in statement just beginning a a secondly, muted at flow there PPE outlook And what talked is than Thanks. of little the was why charge cash about was million you

Tom Szlosek

Okay.

into we I going at basis to guidance up we're on points. XX confident basis points in. XX basis XXXX, guided to basis points XX ended basis what Just think points, XXX the points quite long-term that's XX Like

about, be on rate. because XX top-end considered have an can didn't the of range quite I Michael think, talked minimum. somewhat a We have basis the the they a impact to points given the margin you that variables

as strength that] in items, up will to and complete statement. non-cash [pick to continuing But of Avantor VWR integrating cash you as flow we terms flow our ongoing cash acquisitions continue in you’re our we with have In that.

through. some not see overall. thing that items – we improvement big your provisioning a factor see And opportunities, of is a inventories business, normal will for of it's for You debt, But some do bad of for overall, course us. come kind provisioning but non-operating

Tycho Peterson

Thank you. Okay.

Operator

Thank you. And your America. the Bruin of question next line from of Bank comes from de Derik

Your line is open.

Derik de Bruin

good afternoon. Hey,

Just a of couple questions.

Can specifically this I to past, different growth? contribution way in between granularity and about on a think from should of I'm is mean, on about can little the first – alluded sort the talk you've on a be revenue of just bit the stuff have types? but And diagnostics particularly I the but sort little more I profile one. mRNA interested it, also – you this you, sort in to you [indiscernible] mix particularly laid incremental vaccines mix know, more I'm think specifically bit about on PPE out what the how the as how bioprocess. essentially margin some and we vaccine your think of the roll-out,

Michael Stubblefield

is, remain categories as diagnostic points, in to anticipated, in at also kind PPE strong from in from Derik, the a equal did of the of steady proportions meaningful meaningful tests where we year, quite and the XXX And kind number then to for the the the given fourth kind saw COVID the quarter half step-up we basis being participate roughly parts points were absolute the of in from obviously in [dynamic] in basis accelerate balance. fourth to quarter. the basis question. then book from you the of vaccines diagnostics One role relative have basis order vaccines, quarter vaccines. XXX than XXX somewhat given points, third a XXX tailwinds that the contribution see may obviously addition in meaning the of came the contribution run. and the each the Yeah. of COVID tailwinds related But quarter thanks that of the throughout pandemic, Look in that contribution points testing

much vaccines the So, actually fourth didn't that staffing-up despite much as in did. proportions change as the they quarter

million aggressive kind year out, And in and of production we'll of kind the ramp see being forward rolls half the And indicate anticipate then, coming throughout of in and that depending XXXX. and intentionally theoretically, a made Roughly $XXX that obviously the Going full-year the of we XXXX, are would to range – there on scenarios how and vaccine on XXXX to response half to cause anticipate that mentioned to develops. year. vaccines. you of see second I the coming more put to of the million million declined us basis, $XXX there could in move that could earlier would up. one that that revenue how diagnostics we that's would assumption then, Tycho's $XXX range probably some evolve from out. upside off relative of in here is see of from diagnostic additional to playing $XXX here million PPE approvals falls the would we similar question the we an plus the testing being how We cost

of in [lot relevant Derik said their all these modalities. in As we're we've reforms]

certainly there You the in at are moment. and the well-positioned production with mentioned that we're mRNA candidates

the I far think, it's behind mRNA. excipients and have out vaccine, important significant and significant vaccine, that not what also requirements for also to would materials point – to viral-vector J&J raw supply example, systems, for single-use our are that we AstraZeneca actually pretty pretty vaccine,

are these I as each our here. just think we vaccines hasn't approved throughout of And various and [economic] to so the probably terms those the about modalities represented of view getting reiterate in well. changed required market excited well in potential content don't for of how the we're pipeline that is

Derik de Bruin

higher just is – that higher I'm question – think the is is in of getting? think, think it that margin XXXX, the contribution, I – of in I basically on I the general margin once diagnostic bioprocess contribution you're sort the getting again, like questions most the

Michael Stubblefield

Yeah.

a be terms everything So were contribution. to The going supplying equipment the kind bit if the content And corresponding majority going we of you of some the carry just whether you for it'd well, and content lagged being there I’ll or of of second some is but highest lot as line reagents, margins content, quite areas, have piece in in the even you to some of nature. there consumables a Derik, up quite mix diagnostic for we're the margin stack do probably example. that Nearly thermal of of be probably in at third-party vaccines that some A third-party events, know of to cyclers, that it the the with be of PPE, three then, the of look solutions. proprietary other proprietary those in we're that. any with

Derik de Bruin

Great.

spike did [indiscernible] one. follow up that You one take on on me

I seeing and up, placements of lab the of labs quarter. different sort going mentioned curious I'm you a little in of given equipment being is sort characterize new the Could spending are mean that's that – like through in it pent-up people waiting just – that of in grew just [and I the pick some of You as that pent-up where equipment, bit the is on]? been Just equipment? laboratory just through mean, given like are your peers, of sort instrumentation build given mix like than of sense just what's they're you're wondering, in out? terms your terms more for builds

Michael Stubblefield

quarter sequential quarter All acceleration the in still but moving right. with muted. fourth we even that from to some see somewhat improvement definitely quarter, the saw We third did

was us single-digits. I the growth think quarter for low equipment and instrument in

unusual. the across would topic return still equipment did that historical the strongest we support the this acceleration that see of nothing we lot that to to projects historical the to at levels, certainly year muted for of is the say, the quarter and So, probably out, in instrument purchases encounter to particularly and say flush Derik. even nice did time example, of played the somewhat and in here. on the we of kind are see, growth biopharma it's to levels, a But space, see which category I new relative probably going with still, But – and budget growth things

Derik de Bruin

Thank you very much. Great.

Operator

ISI. Evercore of comes question line Thank Vijay from from you. the And your Kumar next

is open. line Your

Vijay Kumar

you here. sequential here. on assuming number, one guidance, of the guys, on million the a good I'm was congratulations up I a I a most – of on the COVID XXX guess, vaccines. million]. Hey, line of QX top at Michael, if that step may print start tailwinds, look [XX if

base, off as that getting number a we're And if to the heard to X% annualize change? comp, perhaps guidance on to I'm base I well the on comps. that vaccine XXX think ex mix fiscal tailwinds, what [XXX-ish]. the context I base, curious I XXXX, said so in incremental you is close And revenues off, assume correctly, about You and of the XXX cause a think to in drop business of the talk so X% would X% the of vaccine the you easy

Michael Stubblefield

elements, those both to Yeah. Happy address Vijay. of

at the its split step a on and quarter was Firstly quarter any of point the kind the a diagnostic as obviously point in we the meaningful in year but well. level. contribution QX definitely meaningful up, contribution, saw highest participated in vaccine in and we that up Testing in stepped yes, at also platform for

given to see account think, a over for of bad business, that visibility testing your in in of perhaps a still of in do half business. third pretty come meaningful place things X%, increase, second from if plus land address I the the the core XXXX up kind order of with with of at you that we our on of important have growth XXXX. not kind and point. comps book more base to XXX] as the reasonable some to still growth, as to guidance have phrase] good we a a extrapolating other the pretty quarters as with off X% parts modest but orders we're [important QX Relative quarter, to vaccines in probably moment comps way little X% around the QX the well step relatively going book two get side we've headwinds – to jumping we'll have, have could do the a that still is in [XXX, new in, you approved and of and we where and know but in growth vaccines out that's coming estimates So things we and and the

nevertheless improving, still but Our education still behind down, levels. is business pre-COVID

is our pre-COVID platform particularly industrial high and complex business biomaterials and well. still up Our our lagging is as medical still single-digits levels implants

and QX, remember, pretty free normal mostly know quarter, a impact. last you – So was if you example, for from COVID

we anticipate those of any So, don't end markets.

So, recovering the completely I later just in described year. as you having know as, headwinds until

growth you're take level but mid into of comp of some So, X% momentum we've to I seeing think got does would but that year, reflect maybe account from dynamics. the kind think there, the that's I it that single-digit exiting into the X% differences recovering of some

Vijay Kumar

cash if stepping level? some XXXX. fiscal cash Michael. XXXX. comments comment, guiding looks guiding will on And any guess helpful of [XXX] fiscal one like the you're tax rate It a timing there off that that's flows, impressive to I question [XXX], up, a step were tax favorite flows of Tom. what normalized Yeah, element cash it if for like maybe free free And normalized and rate that's grow that's up? My looks step-down level, to why for

Tom Szlosek

a of Vijay. things, Yeah, couple

cash free XXX did all, significantly the did the from XXX XXXX, in we flow, in was which On XXXX. we first up million million of

throughout Xx. the some Act. were than year extraordinary were more CARES that around almost Xx, We coming signaling So, through items there

some to Just employer had of deferrals taxes. we employee taxes refresh or you,

couple some some Act. got other also settled interest a or had We refunds area. we deductibility there enhancements We – in there. were on of the audits open tax improvements payroll, some the And also things and from

or I when XXXX mean, low. XXX $XX number taxes. that that talked To normalized million at I in So, the timers we to one cash you level had the we extraordinarily look was roughly million in will a of north the so given area tax return those be particular taxes, in about.

add income, at know when I about most to ended you at biopharma some and of are around be XXX% investments on some make. what opportunities. areas. net in is up XXXX. signaling factors, some had think look our because at production – One other there around to we're of capacity look XXXX the some element need If of should we we're of these entitlement adjusted items We XXX% we XXX%, you is in We ready that the these talked that’s, I on net income throughout year. converting

are As be an to an some ongoing there some growth. in [indiscernible], exciting to additional there. we've then, that under way capital could some example, working also, working investments got And additional projects capital, mean, support growth I

the well out the course as investments some between into of had higher, benefits point the $XXX year. as cash of year, flow starting will Hopefully signaled relative the throughout in modest we point we sort ordinary XXXX, at that just that we're the an to of estimate So, with one-time XXXX, think starting prudent a XXXX million free for early drive for but sorry, in XXXX. it we the $XXX million this

[indiscernible]? Vijay question, second Your

Vijay Kumar

The that in one-timers [step-up]? taxes should that is any XX% step-up, and that

Michael Stubblefield

if No. if we On kind you you tax XXXX, seen came like from, of rate, you where recall have of just north in XX%. started from would us

the from down of For in certainly that improvement, got some XX.X% we in improvement terms the terms our positive that we're operations. of was inefficiencies the how international guided initiatives removing talked didn't guide There of funding we an to but XXXX, about to. an we to it we've a impact

just rate. employee improvement expect XXs. on run-rate I to one-time to to minor We other into those sorry, tax the down I into factored basis points drive to long-term said also our benefit around to us as around on tax some excess things. had probably do Haven't we've return, some do points XXXX option a continue that XX in continue estimate. rate basis lower gave basis. on expect of basis those the normal is and the a benefits Those exercises stock XXX

any in continued significant or So, confidence being how I able wouldn't tax approaching read in drive into we're the improvement. starting change to guide for XXXX if

Vijay Kumar

convinced [Indiscernible] on.

Operator

your question Cowen. next of from line the And Doug from you. Thank comes Schenkel

Your open. is line

Doug Schenkel

everybody. taking just I'm I a you I ask in and going good back know bad Hey, afternoon, queue, my two into questions. Thank the questions to then just have area. for I'm reception the because heading get

So, is M&A my really capacity. question first on

was guys in always than XXXX. a been and generating You more cash flow evident was that never machine have it

a that little if Given your balance wondering sits the provide to as capacity guess, as detail you sheet types we on us I that thinking you of where could some you if well. think deals parameters that be what, I mathematically would we pursue, would to the more the was give be and want about of parameters appreciated today, just should assess

So that's the first thing.

differently essentially that curious as opening for over to think new because about just they accounts to be you with The doing is there COVID, by you expect also opportunities well you're the after put the expect new be second, that more good, openings of with durable you So, opening new what to time? on Thank are helping guess, I'm even would COVID, I you. account the pandemic doors in durable ends? doing doing

Tom Szlosek

Thanks second around M&A for Doug. take will address piece Hey, Okay. the COVID. your question the and question. I'll Michael

and that right it in see beginning a anything the balance that, our and overall the had has at of a such you're you drive times cash that capital generation, think then sheet times the deployment, X.XX the has In if cash by generation year between to terms X end the on you our X We full could improving around impact at direct that approaching you down a the and XXXX continue of from XXXX. leverage gone times. and do with of XXXX turn continued around be to you a didn't end know you point X

is range leverage times. targeted to X X Our times

flow could we're the about that here. all leverage you're taking going argue flow bit So, on, balance take send that quarter can as get be could if and little to as that that to that we comfortable cash you have we if for itself free And that quarter now. governance available the stay in is inside on well cash be the But of that within it, we would of with would capacity projected plus up That say be as you'd you to we well. generate. capacity, we a leverage the whatever started But that sheet. that million $XXX just cash incremental XXXX, one

approach our actively to the pursuing something. and of M&A And terms a disciplined. We've in businesses has first certainly now that billion materializing. do deals, right capacity all desperate individual but of that been, an we're over active, to flexibility improve pipeline. well but We've X got to is developing there's We're been of engaged. all, not going So be

price, accretive to willing a good to rate, engage margin our not bring rates not we opportunities want but be as to that fair bring can well. but also overall to with cash our growth say, we're pay and enhance As and growth

content things the that that proprietary lab, we're including genomics production so for spaces typically we that other be space, the be interesting we've area. involve find would in the in about that research and lab past deals talked of that to biopharma and And some looking in

things for have single So, scoring deleverage every We've M&A single it’s okay continue quarter, because do capacity us. cost. if got plenty to we're we balance or month, of plenty on the not to essentially on of sheet, at every no

continue we'll is disciplined us to well served and flexibility and be that that serving So us had well front. on

Michael Stubblefield

Doug. Hey,

of take changed to has thinking or be learned our longer-term COVID Probably the we're bit question. what second to a think perspective the up question – what this expand may pick or here. me we've what opportunity Let maybe on our about the experience

seeing think of and personal the And annual I an something probably some this that by be here more nature, is a will view it's to manufacturers, be what vaccine my is into to and even vaccine variance some necessary could the the the going given than meaning, heading are existing that's of work indicate we're COVID that's market vaccine. to the perhaps being perhaps going have starting latter in of data facing year heading to season we on evolving kind unfold toward the the winter again, flu of emerging booster COVID kind the in pandemic even is is part think going here that that – I be more I limitations durable with Firstly, not. likely think

of – at So, certainly it not stage, would to the durability I seems but definitive say COVID increasing. be this

a outside would for all pipeline accelerating the been becomes there that, obviously experience. The will areas building new I that by common nice COVID, beyond could part We of know leveraging We've category, in the a see that this, that could these like other potential you learned have vaccine that and vaccine be a benefits mRNA, technologies clear. to a opportunity piece, may technologies emerging responsive scaling more I certainly here bring for the the to And replaced to apply you be see vaccines that into take accelerating we're but the great presumably to know as if you through that whole think a initiating in, be this a modality space been technology think and you going was would the used of which which that to will a player realm second level have question. of biologic exciting. us. on be here. know Bioengineered maybe acceleration your more already the ourselves research that technology activities many companies technology like technology of and just something lot importance COVID, the is of are

the from on nice of have as is candidates emerged go includes biologic beyond this So, were we lot work give companies certainly of of we that modalities. obviously had even deep and the customers activities relative we pre-COVID well-known a bullish very some Many across value and or sit to see element names today, could hadn't kind a time, names as done some excitement said even space we've another that of with that COVID pipeline relevant market. this us the emerging be of these tailwinds a a leading for long-term. here to as bullish are on be us before end we account we've that and of probably is number more And openings, but all then, an really long of that along, as to that over that a produces new lot as there all our technology that

Doug Schenkel

guys. you, Thank great. That's

Operator

you. Thank

Jack Meehan next Your the comes from line Research. question Nephron of from

Your line is open.

Jack Meehan

to Wanted afternoon. Good just... Thanks.

Michael Stubblefield

Hey, Jack.

Jack Meehan

on did step to the quarter guidance frame wondering contribute any step important Did the little was provide COVID that, seems around like color PCR you a how if half, behind antigen more in notable the could around back for you in an and and …dig up? assumption up? side the just assumption wins the much fourth I bit the some have testing. to It

Michael Stubblefield

prominence you for all – a on of throughout fourth the fair saw pick and of we've it nice calling things, Jack. PCR the pandemic kind where of really Yeah, in was tracking side close the we the the the a tailwinds workflow have and well-positioned just in a quarter rate been with But tonight. late kind know we questions, got in Diagnostics number quarter to volumes quarter quarter's up that there from is half in and, testing was Thanks that the to in supplying. we've on that. that in take antigen-based daily the also from third quarter of of been benefit the started of did testing, contribution that the a obviously pretty we terms And full nice wins. saw we significant

that dig pretty and number governments the here XX% If see other quarter. were over both lot actually penetrate the Americas a we some wins on we grew to government of at state PCR, side, particularly you'll of that municipalities you the our have definitely into in antigen of able business significant with the in there, but in numbers quarter. is A and diagnostic-driven the the

workflow call pick-up it certainly think and and materialized we seeing had that quarter. that we in did from that our So that we I signaled last anticipated had was – the that on anticipated some particular

Jack Meehan

between give color. sounds and that could that? third-party Great, and on weigh wondering you XXXX, remain just commentary that's all the color the just products, favorable, but out some it if to from in then, can proprietary you looking helpful confirm And should maybe interplay like

Michael Stubblefield

year. a mainly product gets the comfortable for workflows moving much? specific of well if and production areas grows of is, a that platform, that at there's of the Well, out showing the other a mix in hold part an procurement Xx That how as R&D because the space. take driven our you third-party third-party year, some exactly also this by and at as exactly testing a category. just expansion. our look historically, the I relative the How know, as the also didn't our important that of to in like of the the lagging maybe platform will how to for proprietary dynamics category and Jack, put Xx That's will were for you XXXX to least bit trend lagged our year, from strong up And anywhere this the by expectation be the driver stronger that depending third-party on question, large couple think one The product our category that margin for category our XX that’s equipment outgrown the antigen Yeah. And be quarter. is comes has few us is by from to of important basis mix XXXX, so with. points we diagnostic saw and And to growth of determinants had a of reluctance of a the XX% that very, up in in has Obviously, fourth how we that really question and margin an mix year influencer for on will as the kind proprietary reflection phenomenal proprietary side range had and come in strong some how Jack. very that that lagged the by lot on guidance expansion those far instrument work a we normal into or we only back and category particularly where outgrow uptick the hold into on third-party also – of It percent. new third-party probably for year. quarter, partners we given a of is space But year growth feel our well. most

Jack Meehan

you. Thank Great.

Operator

Thank you.

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

Your is open. line

Daniel Brennan

times on Thanks mentioned start for in was earlier Great, the I the good discussion year, taking in Michael, thanks. about the to few you think, questions. the a January.

order vaccine about about Any us deliveries how it about of just far run being you book book Could book? kind order solid. You the for and the order give some through the visibility the details out also itself? color or talked

Michael Stubblefield

to And roughly at being level to quoted was kind quarters, just and use as the that in year, the heading up we've ending that compares context last year production times the Yeah, to order approximately book you absolutely. the the give was flavor into And same X for to of specific but number out our say, times X previous to maybe it book the the continued accelerate third new weeks early end accelerating. with don't a of of a it for the how is has here I you quarter needless to fast share year. January, have into

three I book weeks XX% and the something continues the doubt, vaccines, – and business excited moved and mix up bit similar so, fourth that bit fair evolve third in order A to in The the momentum more, And for continues That XX%, The quarter the but in early to I to order we're proportion of would not business quarters, be that in the XX%, came the is if the range from strong. the a we of robust. up very the core another stepped core be quarter the space. vaccine that obviously here. base of business vaccine roughly think we're our in lot fourth here vaccines shifting, balance a that year to toward meaningful new the highlight book probably was book no good there of quarter coming order continues about. it from way. from And a where in said

the probably probably that year the and production So, got the good of I stronger or the middle growing we visibility similar are platforms obviously, a of even base, have these say, mix similar some a in on book the visibility we've a into for historically. momentum than probably had support order we that for visibility approved is vaccine now. strong The book orders and least would very at kind out orders. we've – of very vaccine core, order it's as go and

Daniel Brennan

got just you've Just median more the about you then to plan, six some follow excipients within Got are to the up, highlight got highlight the would and kind Where your you've months lot volume rolling more – or as the charts that that wanted how a products you but of you've could just real I bioproduction? strength? that vaccines you've on really single-use you over of resins or areas it. ask, across you. And are that a of in space? out? given three laid bioproduction, and within information strength last buffers the and maybe you what Thank three whether you are listed obviously, wondering real the Like would for two dialed Avantor's out characterize in critical offering

Michael Stubblefield

to single-use here; relevant very, Referred the be pull Yeah. from and very for portfolio our technologies. all modalities strong growth very, the demand vaccines, clearly to and across strong going that's very those

while used the platform. that the and delivery the was of breadth are going full portfolio piece probably that our of vaccines, applicable For cholesterols of some technology lipids to there, the mRNA be in is be there going the unique. It's to

process to well, as a that's other in Some not probably might key bit other ingredients you see of there are something the and that buffers platforms. unique that's mRNA but

Daniel Brennan

you. Thank Great.

Operator

we is Thank the I Stubblefield to call today. that over the Mr. Michael questions for any turn remarks. you. will back all have That closing

Michael Stubblefield

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

never a as giving customers values I mission As time. world every got unprecedented sincere tireless of express are gratitude around we global dedication certainly mission their our and they who by mine create to day are they've And that and our to this to close, in fact working and everything inspired passion mission] mattered to fulfill more. living [science I setting during our has of our our didn't better certainly I'm world support would if remiss associates the the for efforts

super for As business excited when what and again and for about I'm I mentioned take Until our be soon. look lies then, and well you earlier, Avantor we meet forward everyone. care updating ahead to

Operator

call. Ladies and today's joining. gentlemen, for concludes this conference all you Thank

now You all disconnect. may

Avantor (AVTR) 4 Feb 212020 Q4 Earnings call transcript