AVTR - Earnings call transcript Q1 2021

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Operator

Good afternoon. My name is Annie, and I will be your conference operator today. At this time, I would like to welcome, everyone, to Avantor's First Quarter 2021 Earnings Results Conference Call. [Operator Instructions]. I will now turn the call over to Mr. of President Vice Thomas, Investor Relations. Tommy Mr. may you begin the conference. Thomas,

Tommy Thomas

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

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

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

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

Michael Stubblefield

model afternoon, a the the Slide excluding growth Avantor's today. to year terrific good first our our business growth, everyone. quarter consecutive and results by for the achieved our organic underscore appreciate core COVID I Thanks, all third system, diversified us on strong provide you revenue XX.X% X. of portfolio. integrated the and quarter. I'm and metrics. across start the fully results value starting delivered of financial Tommy, tailwinds, Driven joining rate, improved business we Avantor core We relevance and

play accounted to support services of in continue than XXX EPS. substantial tailwinds to the And COVID for in points realized solutions the and We quarter. basis providing points than the more approximately more growth, critical adjusted and COVID-XX global these growth EBITDA basis expanded We to a pandemic. doubled response XXX role margins

X acquire transaction its Additionally, high-precision position our to we rating in discovery for leverage affiliates, and received and rapidly more drug our quarter. April and share announced proprietary about will the the workflows. I Ritter moment. technology all GmbH upgrades a details leader in improve, diagnostic to offering agreement continues definitive we On expanding XX, in from a agencies a consumables,

as production. We our business continue in supporting well invest core capacity, production as actively COVID-XX vaccine biopharma to

year. focused on support we phase from platforms. performance production revenues advanced integrated range to In Lockheed by expansion resins single-use We're remain used innovation This second have the protect Avantor including a Devens, enhanced space-grade several a with across BAKERBOND Netherlands. across our during downstream of and and we our higher will cleanroom quarter, NASA's silicone chromatography discovery projects Rover the recently model, businesses. long-term our we our European core aeroshell, driving XX% These with J.T.Baker of platform, And launch to Massachusetts, to earlier that new formulation descent scientists offering We facilities. In Consistent protein manufacturing therapies. the discovery into initiatives, on early also wide States Perseverance, are latest the biopharma support purification this created double bioproduction drive helped multiple Technology and full-scale Martin facility in at to important single-use unique enable was increase unique recurring and growth United in purification. selectivity our which and the the Europe. and Carolina columns columns Advanced footprint Martian Morrisville, space available will across our total, our North a atmosphere adding delivery

a in our and extreme ability performed most materials stringent protecting solutions and silicone critical demanding customize applications. to Our from great a role example contamination, Perseverance the particulate of heat proven for

order forward, improve raising steadily businesses, year our biopharma longer-cycle pace markets in full performance, and and quarter Looking the our quarter to kept year. strong our and market to these we has Based end grow. April EBITDA including continues guidance. EPS Growth are we expect dynamics production, first the throughout the book first our on favorable with in revenue,

We share details minutes. few on will this a in

our is noted to some excellent and consumables on all accelerate fast-growing in provide our reiterate and solutions enhance announcement like clinical and of applications. in the high-precision Slide opportunities portfolio and end know with context, of to affiliates. offers as an Avantor workflow-driven customers. GmbH that We've X. and automated handling platform M&A the growth, ultimately Ritter's fit from these Ritter presentations acquire our we applications offerings for comprehensive, markets that that to highlights definitive dimensions In Ritter well. a strategic of technology in more research prior for proprietary addresses it agreement I'd its to leader liquid is Moving

reach specification-driven market dynamics acquisition revenue and combined and such development this relationships will be to close total expansion. diagnostics, is with transaction share as expected addressable of excited We're in similar anticipate business drug we to it customer areas important trials. addition that to attractive clinical The billion share. in accretive the earnings margin incremental the profile. $X including in and approximately quarter, bring and adjusted highly is together the clinical third and of element capabilities end One growth our and recurring application Additionally, Ritter's proprietary a deep characteristics, generate market immediately per to broad offerings manufacturing Avantor's

of Investors about our information website. the see further please the section on For recorded the acquisition, presentation

results. All revenue regions market, end groups quarter performance Overall XX.X%. driven be increased exceeded growth. product Organic once all double-digit XX%. of again to I'd growth organic and to Slide where presentation. like Turning X experienced organic by our biopharma to revenues our the summarize continues first financial

We activities, of of indicators to our recovery are in United procedures. leading the the resumption surgical the particularly trial labs, the rebound clinical to see return of end markets, that to point encouraged including and and in the several elective States, R&D ongoing scientists researchers

related Importantly, head-to-toe for testing personal of role our and returned COVID-XX solutions during the was and growth. produce and support points PPE needed customized in step-up elective our testing to vaccine equipment in quarter. we basis critical materials therapies. protective procedure-related solutions and demand contributed contribution XXX levels to approximately There pre-pandemic a the production. play quarter, significant workflows, support vaccines revenues We a revenue our realized of COVID-XX providing the to services tailwinds from and continued in

response, opportunities are the and We vector-based to per mRNA future growth participate we EBITDA to adjusted for COVID-XX share quarter XX%, a $X.XX. therapies vaccines see leading to was of proud global in and other to the and role in up earnings in play viral Adjusted applications. XXX%

growth, Tom guidance flow in our $XXX favorable our cash generated of on EPS We and to EBITDA Our the details full year the flow cash provide just over free reflect million. EBITDA offerings. growth $XXX will margin are growth the impact and reiterating adjusted productivity more million in proprietary mix free few from in of a quarter continues minutes. volume and

to on enabled leverage and earnings now the a to We Our leverage end EBITDA cash end remain to quarter. Xx the our even Xx performance of we Ritter. first from year reduction close our expect at EBITDA throughout net the year, the momentum adjusted after last at X.Xx of under

You will long-term relevant recall and is target that reflect In Xx focus position on unwavering results resilient portfolio, summary, to Xx our EBITDA. our execution. our market

building remain turn driving of a Avantor With let and our relationships collaborative trusted it over system. culture execution Tom. and through we always, with to customers, that, committed me business to continuous the improvement As and

Thomas Szlosek

Thank afternoon, our by Slide experienced of revenue, the quarter. for representing everyone. approximately quarter. and double-digit end organic market growth you, XX% first Michael, Biopharma, our group good revenue the growth X in product and shows

chemicals strong grew single-use contributions business from production both biopharma QX, in driven over technologies. XX% by and Our

products revenue, double-digit XX% represents strong continued by business and in momentum positive chemicals, R&D a experienced trends driven Strength testing in growth organic lab our driven revenue growth. Our approximately COVID consumables activity. strong elective rebound by which and care, was also procedures. of also experienced equipment, Health of

of a macroeconomic signals our double-digit sector We pulling sectors, improvement, Growth more categories implants quarter. AMEA by XX% both food X% including continues and broader our mentioned, was Advanced quarter and our business, a industrial activities incremental our research we for mid-teens in By first product in industrial from procedures approximately applied strength beverage. encouraged saw in our business group, strong are Notably, revenue, growth in revenue our revenue CapEx & to & proprietary experienced university levels strong an and as medical an industry with significant by pre-pandemic in Instrumentation we investments demand first the of recovery and double-digit in modest for growth, our activities of biopharma production our lab trends QX. to materials, including education consistent technologies business and show microelectronics quarter. approximately weakness saw contributions by Michael to COVID-related in sales driven signs elective to other experienced in us improvement growth, recovery. This reflecting offset resumed. representing declined product by representing As all the Equipment about as platform. XX% the return by and resume. and materials government, consumables, increase driven experienced organic revenue, government Education

Let's move to Slide X.

from reported XX% driven revenue were sales, sales driven hospital revenue biopharma growth fourth Americas, XX% of growth reference COVID-related in procedures. quarter. approximately in sales, health growth biopharma as implants XX% improvement from biopharma government and the purchases which growth regional growth growth customers double biopharma, reported medical organic by Europe, government which demand. in double-digit rate in of double XX% XX.X% at used perspective, daily and well growing organic and a Growth Highlights and growth. grew XX.X% represents rebound digits, Education in from digits. a production and COVID including lab diagnostic clinical than global was production represents approximately Looking care, global sequential with education approximately by as by greater elective of driven in

supported of procedures sales. continued given by revenue COVID as growth, and sales, We the ongoing early the experienced region. comparable, consumable given X% approximately tailwinds, double-digit region a reported the in both COVID COVID in diagnostic of biopharma in as by in AMEA, Health impact and care and a growth also education elective European well organic XX.X% strong global moderate recovery government representing challenges driven XXXX. experienced

the both for chemicals reflecting demand AMEA order and book has nearly business products. strong Our quarter, significantly, and our in biopharma single-use production in XX% grew grown

organic meaning COVID On can see year, less you expansion QX the the the approximately quarter. versus slide, approximately right-hand rate, estimated of side from last this our rising X% growth growth of to the X% core tailwinds

points productivity, compared to period. ongoing as as end This XX.X% proprietary this in Michael and the XXX include driven favorable market quarter period. mix, compared segment Europe Key materials relevance positive excellence. and well XXX of reported prior the resilience higher third results. volume As the has approximately noted, margin to approximately trend acceleration. a prior points market higher EBITDA our of margin our as commercial X in as Americas the basis strong XX.X% business trends model drivers represents adjusted rate, rate, and growth recorded consumables of Slide consecutive adjusted our basis position. by and reflects

productivity margin and reported the in basis favorable margin experience as excellence. approximately to XXX strong biopharma driven from rate, productivity. impacts and to proprietary prior by points XX.X% volume, EBITDA a compared strong volume continue commercial growth materials adjusted higher We AMEA period,

X. Slide to Turning

our margin We a start XX% with EBITDA. me points adjusted expansion. achieved growth adjusted basis quarter Let of in first EBITDA, approximately XXX

growth. our productivity, indicated to cost As in strong discretionary strong return prior equipment margin and tailwinds. These mix as growth containment and growth as production and X growth, reflecting commercial volume mixed offering, tailwinds biomaterials modest offset in partially strong are regions all I biopharma slide, the achieved instrument consumables to well expansion, tied excellence, by on proprietary

our growth per operating ongoing strong rate were quarter. earnings income from the in XX.X%. deleveraging tax drivers approximately adjusted refinancing and our Primary achieved we and our to share, in interest EPS Regarding in XXX% for improvement expense reduction performance,

We a continue to year. for tax forecast full the rate XX%

flow. cash free to Turning

our to free million $XXX difference first As the $XXX to flow The in Michael relates performance. first mentioned, strategy working payments, and our of generated payments in quarter quarter million of we to XXXX. capital XXXX interest compared in investments of year-over-year and related the the strong CapEx support higher to compensation timing incentive primarily growth cash

free year flow full guidance cash reiterating are million. of We our over $XXX

to Slide XX. Moving

X% XX% but to for end raising Based to original growth Reported strong $XXX guidance. growth COVID-XX pace half QX moderation the guidance expect has business, the improving half quarter, strong April extraordinarily X% on As year to the markets Growth the now COVID-XX we are to tailwinds Michael in reflect are given for $XXX core we approximately for to compared year. to in X% in the do to for performance, XXXX, indicated, outlook rates growth of first second the approximately second of X% we our the and guidance of million with XXXX. in X% is dynamics. with the XXXX organic comparables full together kept guiding our as million,

our previous to approximately share growth put in that and improvement, full our on versus We EBITDA hold begin due from our of first XX the operational our to refinancing costs, strong approximately also guidance increasing interest XX%, adjusted reflects higher deleveraging return are entertainment, to continued global lower quarter of basis per were continuation half of Also, second now effective results, global This year up, adjusted XX%. expense improvement reflects of travel margin are of approximately be such of anticipate expectations first points offerings, outlook in quarter as in points. up basis rate commercial the strong growth an XX%. original earnings and we expansion our We tax economies pandemic. productivity as XXXX previously certain and and open This results our from including proprietary excellence. a operating XX guidance

We also share purposes. guidance maintain for a flat count

before, full we As stated year of flow are free reiterating $XXX guidance our cash million. over

the we by our an expectation QX mentioned is that capital ongoing payments rating acquisition. cost increased we outlook opportunities EBITDA loans, Ritter modest and debt Michael to reduce EBITDA based further ratio Xx improvement lower and remain Our achieved the our On we'll under part and working pricing, leverage growth after growth. support needs pursuing the leverage even term X.Xx interest on our in to some in to offsets year funding EBITDA of are credit reduction. full enabled with from improvements

as Ritter concludes This share remarks. the guidance call well in to about Please expect We more now in acquisition details that back Michael. not over this the reflected about will impact actions financing to from the these have as coming the weeks. Ritter I the acquisition note prepared repricing hand commentary. we my

Michael Stubblefield

and on Reflecting by our are improved the we rate. first encouraged continued quarter, growth the strong financial results core

therapies These making attractive transformation. biopharma and combat well deleveraging. to expand important our to execute executing margin in milestone our business. and our to to support vaccine on on focus COVID-XX [Technical an the core continue our We by strategy to long-term Difficulty] market EPS and manufacturing the Ritter and end by additional definitive evidenced our capacity. exposure growing our acquire will investments pandemic support growth investments growth marks expansion, steadfast our agreement our remain significant in as We

order relevance further our expand, the of to to book integrated model. discovery delivery continues Our business underscoring biopharma

expect portion it deliver turn more. mission results look to mattered will in your we world for our ongoing ahead, I for are your of well As setting continued the investment for interest and we full you begin science and over of in to Avantor now for positioned and Avantor's support. to operator never the want motion year. I strong to create thank the has better a call. to question-and-answer growth

Operator

Instructions]. [Operator

Tycho Peterson the from a JPMorgan. question have line from We of

Tycho Peterson

squeeze two in. I'll to try

pretty COVID the obviously on here. tailwinds, the First bumping quickly. you're guidance tailwinds. fading Obviously, Testing

the great talk the then and kind relative really So mix you how you're And just increase? bit about thinking prompting bioprocess, what's numbers. of a about little can

of you viral Just was are stockpiling? and potential thinking there curious, about given kind then any COVID, beyond current your element therapeutics And also, capacity? mRNA how vector of

Michael Stubblefield

that strength the level. in of even which an our the that contribution continues midpoint, bit of little about course, be, for in full XX% consistent the million to year, world, in bioprocessing initial our diagnostic the that $XXX obviously, million total that rates, the you half that QX year, of anticipate QX. we anticipate based would decline the that improved in we've And see ramp vaccines seen saw that unknown. the second you again to at COVID and infection noted, The that perspective, It's year order the outlook strength we've XX% pretty second tailwinds From seeing of that a point, Thanks, the the continuing. being been aggressively certainly in at offer mix year. tailwind diagnostics of the XX% a in it reflect appreciate that roughly kind With throughout -- guidance. plays to of expectation out, would guide a solutions into we we quarter, it tailwinds, are by And strong full million. Tycho. our mix vaccine for for was your strong In early as the certainly center continues -- as around to assumptions at the taking hold around this view year. And we're embedded Michael. out last of is business workflow. the kind XX% at for on level. the continued run see ramping How here in Testing as the Embedded the the still books question very I they're total high $XXX we in way And first we've $XXX would for on an original suggest, there in year, us to to the still days QX. we're increased obviously, kind our of question. the of the we around

advance core order our the of pretty it's in continued monoclonal that. impressive around mid-to-upper a continuing at remarks, in a mentioned to at getting world, our The book both production as share antibody is driven continued business. our I growth certainly well as in has clip. vaccine and prepared And we're strength level teens As

be mentioned as capacity theme. We're we're positioned well the both cleanroom our So an pace continue on growth about And And innovation my a to important to capacity as I use. in with to our keep expansion chemicals in we're seeing. to for year. the as that fantastic single remarks, investments continues focused for well excited significant

the and particularly mRNA for we vaccines, mentioned will other see term beyond add for real already us. You look But at opportunity when to as non-COVID longer mRNA we an viral And application, think COVID. I vectors that the a to pretty addressable important market business.

in application we're momentum encouraged of of of forward. the technologies the current as new So indications some these by business, going not well by excited but to continued as we're strength the only funding some

Operator

another have of Derik the De question America. We from from line Bruin Bank of

Derik De Bruin

a of on just Basically, a what Tycho color bit more little it's of asked.

sort it's than the given more we of we ahead, COVID fair say? bioprocessing. year, even, say, when is of a more Is -- look for the sharp that years i.e., rest I for to So half graph in an about steady back of the the current can rather at I level, the think sharp testing of would mean, dropoff the

Michael Stubblefield

look for year, think $XXX the at it and particularly into million at Yes. half a QX, bit if relatively back the as different, of mix fair. we midpoint, point your year may being When consistent I we about year. you the roughly throughout in is at little the did look what the total you look get The of Derik, tailwinds

that think we of diagnostic first of half little expectation be I in the anticipate the And be year contribution Tycho, I mentioned relatively could second in throughout the vaccines. year. weaker -- than as I the workflow a our strength And should testing PPE bit half continued stable think the of year. be would to the

Derik De Bruin

about up it. of leads question. to year-over-year. you're I the should to Got obviously That sort expansion? be we think margin I mean, mean going the

if the that driver? is diagnostics than I sort the wrong, higher -- -- be the correct of me I'm that's think bioprocess we we margin should major

Michael Stubblefield

will consumables solutions, obviously fall at margin If materials is our into part category, most business. proprietary of the of our of look that and which production you that our solution highest

we strength our important an So a beyond is bit goes NuSil certainly bio of production there driver It platform. about talked that margins.

platform our as quarter, saw in standpoint. pre-pandemic So have business But the to that I do which for be it workflows, on as there prepared testing going we important return us remarks we is of going consumable standpoint of wasn't -- a a last content my an forward. from levels both kind fair to those that chemical think in bit a well first

of group the that our workflow So come Derik. the in in average, would margins part above

Thomas Szlosek

really factors biopharma But to COVID, open get year. even driving are besides weighted there strong Derik, particularly expansion point, when average biopharma the margins We've are for COVID of order that mix the superior the in are those And margin got you other production. the to that book full beyond a overall portfolio.

So COVID, it's a given right, it's mix it's dynamics -- growth the portfolio. factor, a but beyond in you're the

Operator

Our next Cowen. Schenkel from of from the question line Doug comes

Doug Schenkel

be able are think share get be would great end about hear said, assumptions for incorporated to market there deal. on in Ritter year. what's given and leverage It the your characterize M&A, given topic cyclical you'd the in to be guidance One, Two, how markets, within particular, the point? three, constraints, would that's signs of That the hoping that advanced for mark, this you applied well the at improvement. biopharma it technologies all markets. what's you're year? also going and first was more some organizational pipeline would to I guidance, your terms would by M&A. more more? And then interesting be readiness how financial for for beyond those I you to describe on your on deal of revenue the target capability on So range assumptions First, into And end

Thomas Szlosek

$X will of Yes, early to Doug. so be This Okay. capacity billion we year number. It's But of in of think Tom. to Ritter that -- the Thanks deal, call roughly capacity U.S. the it, the individual spending north aggregate hopefully, of a or Thanks, have questions. it the rest for have deal, deal. for that out -- closed, spending mid-July, M&A is just the we to early when euro-dollar dollars. same

between this that grow, depending you for billion capacity get that and XXXX, -- what year. on $X somewhere $X.X done. when we've to So And into billion continues

-- you the million we've Avantor it the well But of of first have to readiness, organizational an terms down is the generating in the integrate that. management from to business VWR. sustain we because $XXX the a certainly I are as capacity say winded that -- able program But deal demonstrated this perspective done would In that ongoing be the we've place Ritter. VWR deal. large been on that has integration the that able since we've had deals while that office of size we've Xx completed addressing synergies And to

track when So over that you And the pretty further, good record. go years. we've of back sustained kind

But don't capacity of confidence. would say mean, simultaneous think multiple integrate I we're high something does come stretching I consider degree I integrations, have the in point. So there a we the of we that size. think And Doing think fairly discussion I capacity to a dollars, there's I yet. there

margin think the know, of points margin. we and That I the pipeline, also quickly. terms us opportunities well on And both will in that the space, cash for both as up EBITDA in as in help very to gross diagnostic that Avantor we're growth the have portfolio. biopharma And deal be focused that superior we're and concentrating And areas the relative flow speed better has deal offering. to rates areas overall margin us Ritter production as demonstrates nicely. of you some to that rates, In profitability lab of are a existing the to looking existing proprietary most interest And would us. a where

So the the businesses continuing All we workflow. engaged. are discussed about

a review. regular have We pipeline

that in capacity place. have We

the double-digit we're digits the kind be education In year-over-year, terms a it improvement is year. government on in where for decline seeing in high to close guiding the care end low X% single education of And biopharma health most market, you, would area to that's probably an total, growth. similar. to just to From so of year. that the overall, given the perspective, guidance to From perspective, for the X% we're last and remind

clearly So digits. in the that would double be

advanced technology like materials, & return In breakout, just to terms a of applied not we're not growth yet. a we're including massive forecasting

to of And consider kind to so expectation. growth mid-single-digit low single digits you that be can kind of

Operator

from Kumar do from another of We have question Vijay line the Evercore.

Vijay Kumar

One to because here. Michael, that like base just about think get high. of to would X.X%. on guidance to us is at looks the COVID mid looking math peers the ex it want base I'm I assumptions? low to end, what low my on the is cause And the X.X% -- I correct most end? is your to are conservatism curious

Michael Stubblefield

Yes. Thanks, Vijay, for the question.

core a X I in of sequential now firstly, think down were it's business improvement QX. straight QX, important the We on in to business. recognize, we're strong out a quarters of day

that, rate the was, growth for adjust in you to call If X% core quarter. in QX our X% it,

So really strong the business. base in performance

are again here. at of in going quarters comps next obviously, quarter easier here, a you bit And into the little where for couple run to in fourth comp tough business so on get here, a clearly the least the before the base

at down a the of break we points talking when COVID think X% X% to So of on the I growth. couple Vijay tailwinds, midpoint our you're

or we X% of So probably so base X% you kind to on point to the -- can but business.

Vijay Kumar

almost mix Like, in you, came Michael. Margin was effect shouldn't It strong, looks That's mix but annual like that continue that strong. QX million. Tom. $XXX proprietary XX% one in it the half. was curious was I for wasn't driven. I'm free cash And in side, performance why back that extremely That's helpful, products quarter the on maybe guide. guidance And the free mean cash our very impressive, of changed, the flow

there cash? that free any impact So timing was on

Thomas Szlosek

Yes.

to say outstanding, basis So rest margin SG&A I'd EBITDA. on productivity leverage controls XXX basis you improvement gross inflation, commercial around between But those pricing as XXX so our from performance, about mix and attention just relative and well points margins volume fixed costs. of margin. half gross first on came good on that spending good or the quarter was yes, and points on really about as the to had just was the

rest we SG&A. in to say for I rest created the we relative Difficulty]. the would XXXX, significance the baseline have that a to had tough [Technical You of so recorded fourth quarter the that or of of growth consider growth of the year, on ourselves. you XX% When the

so quarter, quarter said, And as are ones going this the strong and first to for year. second we've be

strong see margin as well. performance real You will

second -- see leverage the volume in which think be, expect the it the to in the us then the got would now. that that it first would quarter at first end the the we to XXXX. expect you for hope half We're at quarter. $XXX I on reasonably second were XXXX right closer quite of million Vijay, least cash quarter the for was be on for what the of million. of margin will won't $XXX of I the guide, the expansion On have as and We year, knock free we in upper flow, we number we kinds

XXXX. the as we inventory, we've that what had you it's added roughly that capital. necessitated we days One of a look roughly $XX say throughout So business the quarter carrying is of number decline. growth days just would working in same in it's as the inventory what the at We we probably But sales, investments see. did have I when been days, we a in in can million the in inventory bit of the the X have factors.

there up shape So investment. was a that. March relative a we're year about good million. But to on were on the last sales $XXX in receivables, And sizable

growth you so to a significant receivables. would expect And see in

dilution future a So inventory, the of have that's but free bit you cash we on think going growth. and support to did flow, receivables between

of the elements. I this We other couple payout a of also mean were first the comp were quarter last they have payments. year. mentioned in what I the incentive twice year

it -- in includes investment. all number the also number the So that we we mentioned,

We didn't much several give quarter. Our showed this our we we the mentioned by what in, CapEx had that of -- -- of support the But we're guidance plan, focus. so, of of that's much All $XXX behind to or is I in to million Could be the QX business. so the that continues is be performance an with us expected. had growth before say to in quarter We kind made you get investments pretty we're we would year. but for what if we full the area and another this. that performance we hope the you was on pretty have want would expected, that better? line dead-on working single-use

mention So recall mentioned, refinancings -- point all is might you'll last I the year. I Vijay you should did we -- one other

up moving ended from second part those, towards quarter. interest payment As third the and fourth the we dates quarter quarter the of

year. So $XX we about in pulled first $XX last paid were million of into the payments million that or quarter interest

back that million. a from should perspective. you again flow we'll So forward quarter the once quarter, happy cash second free with in be And $XXX looking strong get it on really a making cash to

Operator

We question line from of Nephron. have Jack the from another Meehan

Jack Meehan

third-party sales more on just granularity double-digit. Just proprietary wondering a quarter, if versus giving both could in the start little bit you by

at color for margin going from right? I additional you easy And have think Is that What's pretty to look comps. that mean XQ? you any some Just there. third-party as XQ,

Michael Stubblefield

in Jack, first regarding Thanks, here for proprietary questions. offerings our On your third-party both double as strength question obviously. go into we'll digits, the as well of the your quarter, the

is, including really the well so year, proprietary the in example. also, Difficulty] the for you strength some think But proprietary bioproduction our aimed of I look production. seeing one, you business as in other the [Technical offering, we're our time towards our first it for the piece important -- as offerings, we're our offering, in in both biomaterials our vaccine reflects know, growth when fact in tracking there that as at

obviously, average And side there being strong of driven lot is the we well a above are things, -- strength for us. yield by and consumables agreements have workflows. the testing some margins some also diagnostic On but these structurally of there third-party chemicals where group

Tom from being biopharma growth lab and contributing to XXX the a return to So of but health that margin also academia just standpoint, driven certainly expansion referenced. points the care, and by strength basis gross margin general and across

So for quarter good the pretty both were trends in us.

Jack Meehan

relative one what here of color Is can is? follow-up seems that around the any peers. as of little expecting kind give your you And more there you're Is like COVID than steadiness? mix have guys expecting bit durability Great. reason more there one you're on It testing. international some you a why

Michael Stubblefield

But we a been, level continuing. Jack. different a question, been there, where throughout good testing than It's clearly, stronger at a which Europe. the see look our rate and in has persisting been bit you we if U.S. And do probably our where That's strength Europe of we've in pandemic in there's infection have the

that continues would up second But our held a month modeled data we've testing suggesting publicly we a this into out we compared continued strength. the still I to even think consistent pretty what of that a stronger QX that's second the bit probably had the of do falloff and quarter, durability half be points to than we're were bit beyond anticipated, occurs in year. there, We year. we to a see here. in see that outlook -- into been anticipate into maybe in a of and And lot

look you going the to work, schools to funding available testing to and If back support just and K-XX employers just testing that's for associates the getting be name to for at and U.S. foreseeable pandemic. albeit the a do to what the be we modest future, going more examples, at we've at testing couple a think height seen than is here perhaps of of level sustainable plans

Operator

from question Patrick Donnelly the from another have We line Citi.

Patrick Donnelly

down this low you for single piece, technology just advanced the Michael, maybe on quarter. one

had I think in it grown XQ.

obviously, low broader just the a to think single-digit expecting macro through encouraged you talk be about recovery. said terms that signals, talk we the you Can you Can really at Tom -- pointing outlook should there? for of for looking sounds conservative by single? you you are just are And growth it things guys is reflecting these I suggest maybe like low kind the How of the there? in to macro what higher year.

Michael Stubblefield

for Thanks question, the Patrick. Yes.

maybe of comes is exposure. overall from think of our to semiconductor It's with about revenues, some in business to resilient. of about of it half business of that our I part the growth-oriented first continues put context. X/X that piece be important platforms -- with kind pretty that the And being in

end third-party gas, then have maybe linked continues us. and we and flat semiconductor business food tad markets manufacturing Our for percent We to [Technical more -- a strength our XX-or-so oil below to into like beverage be that's Net-net, and Difficulty]. petchem, cyclical terms. other offerings in proprietary just of both offerings a the absolute were down

I was off think than less a it quarter. in X% the little

certainly year-over-year a not significantly contributing results the to modest here. So decline,

minus, performing. where part think on business to kind that or is Even business from low were digits. plus in the been we So of pre-COVID times, it's single of the track I expecting print

would of before the I around and So end they're low PMI world, business certainly of year improving the a is holding we year anticipate kind kind think. of throughout getting to sequentially outlooks the up single-digit that where at the bucket, and

Patrick Donnelly

just the in in And quickly forward helpful. How in COVID there? as just maybe think expansion I flow maybe then building a years capacity the up the robust earlier. of demand the It's your that on terms that is as secondarily, due it level this then pulled bioproduction on the strength always following relatively guys side cash terms of plan Tycho's it's Was question you're filled and the gets the you out And couple there demand? expansion. confidence of on of to well

Michael Stubblefield

questions. Great

single-use So certainly, to itself as now of we be couple the growing And north years portfolio, business, pandemic. that you part this demand part And of work our add that's the then COVID. business through to the we've strong. been of of as a The the continues accelerated describing coming for from base XX%.

-- very vaccine single-use prevalent are Our these offerings various modalities. across production

in an which that tailwinds significant to for business. single-use capacity reference place. the part well continue business had to as growing we as growth order up A with our of we're base book And plan accelerate more for place the to that to seeing. times And as and book, normal put necessary to it offerings that So we establish investment we growth definitely have account lead in really is is our keep in significantly. the our order for our

to instantaneously. capacity the completed the I hiring being lights on, ahead prepared demand with when realized so go the up we're full help we the remarks in referenced keep place. shift in have do pretty can much that meet of ready my and with teams that So that be We're so something will we've take to to the get months full we turn to there the announce of by that are possession that July, ready out facility. expanding single-use facilities, week we'll we of this taken produce assemblies X by existing demand not second the but X or addition run. only excited we that to -- a of Europe us were site facility But in construction

a that able doing growth team's with the the sure great up to and So sustain making keeping capacity it. we're job,

Operator

Sergott We have another question line Luke Barclays. from the of from

Luke Sergott

you expect online sales follow-up business over how your on out? those as an years give now? a perspective question idea the should we couple and that as comes big incremental single-use of capacity starts next Patrick's Just on Can from is And us that the -- then filling expansion. what of an business capacity

Michael Stubblefield

it's growth rate why probably reason XX%. And no And that is growing here. we're platform. type north seeing of of our how obviously, midterm that top of least business at XX% in through our of bioproduction XX% to total year. of been part But for this That persist the on pre-pandemic won't tailwinds

Luke Sergott

Okay. That's here for it you first the close. it And those couple precision the on diagnostic that seems middle helpful. base. of manufacturing, over incremental know sense again, years your strong has us expanding right then this exposure, Give lastly, post in a I biopharma. as see And strategy Ritter, down customer opportunity guys early of like

Michael Stubblefield

sweet really consumables our manufacturing It in capabilities offering lab to workflows We're markets. number spot across really of our our fits end obviously excited automated to the into the here about portfolio. of these opportunity bring a

we're discovery. the you selling drug their the we've products are clinical another at we're And in great set and core that when OEM at onto had as overlap kind trial our here. customer look about offering the as excited beyond content well that exposure significant clinical you expand in they've You these Ritter to great the And mentioned focus And of of extensively that where kind look ability area workflows has historically. already. there, diagnostics exposure business when used These got biopharma. workflows customer customer the has,

channel. into products a be Ritter to so coming drop are And the in going from our straight

be scale with ability the area the that's certainly the our it to us since And of are certainly, of been structurally going of part along over constrained, throughout to to able associates going for customers business part our even offering the is excitement sales having target they rest excited Our -- forward. the have provide. not content be investments an attractive expressed to an before that it, only that to pandemic, the add reach their is to accelerate with This the as announcement this here. the the but that. bring and the expand time And but having probably we'll the

Operator

we Next, have Fargo. from Leonard Wells Dan

Daniel Leonard

testing all you question. ripping distribute, terms versus couple I the A much Jack's exposure how diagnostics to how the there? of views think COVID are COVID out us just you testing Could off in lab-based your one much point-of-care characterize understand trying is is divergent of as

Michael Stubblefield

Yes. Dan, question. the thanks for

out of offerings of are we we the the are X us. workflow testing to important there certainly to care. most deployment antigen-based do for we're going have the that testing the going categories major the have being mentioned span as PCR that But before, even kind content significant at with So tests on

How to as and kits in again. for traction themselves. testing from as exposure to workflow. And PCR that preponderance today will said on in we determined. mentioned, and test beginning, OEMs antigen-based distributing we've in kits be term the out yet as their But these which testing, content a hasn't as I our tests and we've of well tests today, you been have, the As the then think, providing had production offering of also plays serological be is the longer much

Daniel Leonard

region? with your in region my flagging? the India follow-up. for And or you worth color if Your strongest outlook on APAC foresee COVID quarter, else you then wondering issues more the the in any anything Can outbreak offer

Michael Stubblefield

most unfolding developments probably in centered obviously closely. is rate the of perspective, India, the we region a to question. in for China be it's it's We're the see good infection from see strong. a We that what's disturbing see And No, continues citizen the probably to do pretty around following concern India. with there. example,

around continue to from and standpoint. pretty particularly Korea bioproduction a Southeast be Asia Singapore strong,

today those order book of all India to is the and than business a We X support significant continued us we anticipate regions, there. for probably less a for overall momentum us. have of percent

we time I it's return some pretty here, of impact. serve And modest that So there a given pre-pandemic which the very, we're demand same and we're experiencing. testing can the solutions, very strong prepared they're obviously At the obviously, outrage for imagine levels PPE a of end kind seeing, markets that for though, the being to well provide. diagnostic to things bit stumbled like

anticipate But continues would So the quite following the we mix momentum we of well. it But continued imagined, differently the run what the had bit than business in closely. probably to little but region. business a unfolds we're

Thomas Szlosek

Yes.

to Dan. wouldn't here. that add The a more there, QX, take Just color in XX% I little

driven As for They're Michael by for some numbers COVID strong, that strong to type dialed year. a in our got going double-digit really mentioned. year had kind part testing the of said, but just last increase of We be Michael the we've right it's QX the into region. around

to And have countercyclical are for comp some our that so there's we -- there overall things actually are to that comp -- QX.

I to the QX your But strong would number So results. year. based the really enthusiasm temper I want QX would a overall -- the expect for on outstanding just

Operator

the line have Tejas from Morgan another of from Savant do Stanley. question We

Tejas Savant

does, vaccine there's growing think on timing of you, ramp upside the capacity And sort the current future able the may sooner Just book that order any related Does had quarter, you capture around for eligible and you on. chatter than of note, so forecast for. ramps one to mean, portion all that then last you vaccine a it be if sort follow-up, COVID essentially I only vaccine still sort boosters and your need on of the and the forecasting? that of the not second, Michael, you're noticed account of important is your for front. for

give capacity So in us recent this an light et that just situation? on you expansion, can update cetera, of

Michael Stubblefield

you for this tonight. to million as to certainly do are into orders is quarter. we approvals investing XXXX, $XXX starting outlook that that pretty aggressively only we're well an guide joining get there, order not in as now call which orders throughout that And also stage, Great strong significant. the the do million to Tejas. appreciate are It's I place have, $XXX that delivery the book From continuing in at extend in XXXX. have build we the questions, the built standpoint, reflects but

So I mutations booster And almost will think are think But start have we good a this address that sight. into it's that that shot there part the of wisdom variants, business, becoming a need line be think certainly you on build the I for the out the there. various to of I prevailing see planning. to fall that

vaccine of is space support the Defense prioritization graded peers the one been whether vaccine order based line. certainly, the in the base Department of the One of you with robust comes the protocols quarter those the orders strong that is have we implications, a that of with really well on as to orders the order have capacity front as the so-called status that place move at that as require through And challenged our you as as things or ramp just business enough noted, not us you to book. well instantaneously as

throughout get where number are out relief will and date, a going provide certainly to But across next adjusted some delivery more into of so the a I to chains the We've coming industry And to have the had online of had pushed year there year. businesses, that. certainly series the of have been that balances. that well or we the -- are core instances here expansions of supply some suspect are reflect straining the planned to be dates to

Tejas Savant

do helpful, follow-up Super the remarks you be the on? advanced supply-demand for move there stay it. to you you on 'XX. on to potentially about through so underway technologies with separate a Could with the for that's what nodes guys thinking your and earlier market materials. tailwind Michael. nanometer semiconductor lower are one the Got disruption us that And and impact expected How and are of essentially

Michael Stubblefield

to high quite not Yes. numbers. that the We strength type from platform and to pretty platform Difficulty]. historically, stage, growth digits, levels, that quite business we like often been that reasonable see And and resilient frothy that a The an lot. double-digit single grow [Technical It's one in and it's for run perspective. of continues it's our awful of

a us great technology allows to here. that footprint serve the Asia from as and the have We as in the growth well is U.S. fabs in

technology advanced one of strengths certainly, our part the of So of business. the

Operator

are this call the to There Michael remarks. questions would back time. to further Mr. Thank for you. like turn I Stubblefield at no closing

Michael Stubblefield

a business and for of resolve science live our all ahead living Thank to are support continued everyone. my better world, Day who make to the be for Thank well, information our and forward Analyst today. our meet and to all But you success. and customers you here mission our super-critical is as I express on to in participating an lies our We're again X. are helping mission intent take world. create wanted details, We'll including we steadfast our be Until our us gratitude and and values the and want take This Avantor look you. host Thursday, you updating call more for next. to close our in aware efforts in to about the to September proceedings, our day motion registration weeks. of excited when then, of every opportunity the we Investor putting that the coming care sharing in for of what setting team the associates around I on that and

Operator

conference this call. today's gentlemen, and concludes Ladies

You may you participating. for now Thank disconnect.

Avantor (AVTR) 1 May 212021 Q1 Earnings call transcript