AVTR - Earnings call transcript Q3 2021

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Operator

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

Tommy Thomas

you Good us joining morning. Thank today. for

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

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

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

Michael Stubblefield

the strong our The revenue a execution. XX.X% and tailwinds third quarter Slide organic and quarter growth release X.X%. Avantor's our By which seen you were of approximately us driven COVID tailwinds reflect track now We record press rate Tommy vaccine-related joining COVID today. of our offerings. growth I'm Thanks our and team's X.X% including principally morning, by X. continued of business starting end core achieved in on everyone. good appreciate across I highlighting markets momentum results you've

basis EPS organic aseptic agreement $X.XX resulting share. line adjusted and XX% expansion Adjusted points. top EBITDA of global to transfer pumps double-digit single-use to single-use addition XXX definitive results offering leading In nearly technologies, fluid announced for Masterflex, bioproduction. grew a peristaltic expanding acquire XX%, to margin grew a EBITDA approximately in delivering In our manufacturer we proprietary we September, per of

have since We close required to have short financing the order. in intend moment. clearances received I transaction transaction in all more share the secured regulatory will about and the a details necessary

to a driving changing in in our are focused capabilities investments We as on and with innovation and leader capacity. growth role life committed and remain science

several the used This expansion workflow. production capabilities quarter, downstream we advanced for initiatives bioproduction applications and upstream in chemicals including our in key

We expansion single-use strategy also European advanced in hydration new recently Netherlands. opened the facility and our a

innovation, of through Nanopore's with we instruments, and and associated demonstrating the portable global Additionally, a helping sequencing laboratory Oxford Technologies, Avantor's along our Oxford from across Oxford realize manufacturer agreement access relationships consumables. will channel. the reagents scientists Nanopore. provide markets sequencing commitment broader real-time potential combines all breakthroughs with end with agreement to announced Avantor's customer of of It breadth next-generation through consumables and Nanopore to scientists technology sequencing kits the depth nanopore device, The market-leading commercial a our of

role for our believe we momentum. ahead, business innovation Looking in us positions the continued ecosystem

are in and year. this on remain will share the guidance business core to Tom our strong few the minutes. for once our again expect full raising in We fourth quarter a details

from set us and described our us During how our position growth. competitors apart our for Investor capabilities sustainable recent distinctive long-term Day, we

products services breakthroughs. and third and Our the our of scientific quarter strength business results our prove enable how

our finalizing with outstanding and our long-term delivering in line year in process operating targets. anticipate the plan of are We XXXX another

next part year. of more share with will call as early you fourth earnings We details our quarter

single-use I'd Moving of about will the highlights pending strengthen to our Masterflex. market. to from our biopharma some slide Masterflex for on acquisition further like of announcement X. our offering the recent high-growth reiterate end

more technologies play workflows. in high and across workflow. addressable support role market emerging Masterflex's and industry-leading managing Masterflex's giving central supported announced transfer previously More is The years, technologies mRNA facilities and XX% for are that For and biopharma, and integrated has biopharma a and therapy growth to biopharma including revenue research Masterflex RIM monoclonal fluid expansion a established been an the throughout of vaccine than COVID-XX. a the therapy providing including relevant space gene platforms both access fluid transfer area antibodies, fluid in growing all bioproduction significant single-use double-digits than cell Bio. us and of of production XX and concentrated is provides that us billion Avantor solution by acquisition our of aseptic $X is fully transfer for our manufacturing

we Our is a organic our single-use as overall to growth see action. and acquisition This example great meets platform this our transaction a driver revenue accelerator of been has our acquisition both a and quantitative in and sales criteria strategy rate. of further of organic date revenue qualitative bioproduction key M&A

double-digit benefit our transfer gross margins. integrated financial revenue growth fully will aseptic our from and solution profile will enhanced fluid workflow be bioproduction by and customers throughout Our the Masterflex's proprietary

Masterflex to and Avantor welcoming the close we are team As the in this order expect transaction looking forward short family. to to I mentioned,

Revenues Ritter acquisitions. nearly with by like performance and Bio high-teens including end currency tailwinds in biopharma groups on foreign the RIM I'd X. slide regions growing XX.X% XX.X% and market growth growth. bioproduction. Overall to driven XX% and of All organic organic all summarize our an product in to experienced the our was a reported basis third exchange quarter Turning increased on impacts basis financial results. strong

vaccines. single-digit organic contributed market about driver COVID-XX of the growth proprietary sales second in being Technologies support the consumables materials and also tailwinds experienced high largest consecutive end to materials with We the applied quarter. the our growth to X.X% production and COVID Advanced for

in sequentially COVID As contributions tailwind revenues decline aggregate diagnostic expected, reflecting testing. a declined from

XX% nearly for growth, tailwinds approximately million to top $XXX was the reflecting strong toolkit points. quarter, COVID-XX mix adjusted net in income, XXX% cash than to expand the income doubling sales in time around favorable to the the generated and of and Despite XXXX. and number the leveraged historical interest earnings System. while proprietary strong our lower more than of of inflation basis a flow cost Business in compared year margin wages, EBITDA We and at million including full by a XXX by raw our line excess enabled rate. trends, continue EBITDA the up CapEx including ongoing Avantor across categories the Adjusted materials $XXX $XXX more we third-party tax million of to quarter lower of approximately $XXX.X ABS growth execution XX% transportation growth We expense in consumables over to along expect outstanding products, share materials, in Adjusted per grew with growth million our EBITDA year free support XX% initiatives. prior in same investment reflecting

the of will of summary, obviously but fully XXXX. financial at results I expect net to strength times our let the quarter System. our adjusted our sustained cash me strong to EBITDA confident quarter funding the X the focus have third transaction in X supported EBITDA another delivering and range strong X.X by adjusted you relevance we Business that of for targeted detail. our times for profile offering team adjusted to the In leverage quarter, The second and quarter results biopharma it Avantor us increase in our turn from in flow more integrated leverage quarter, to strong of over end and fourth times the our Our and times within With our outlook proud am fourth our of beyond. on Tom that, X.X and walk traction leverage portfolio, down in execution the Masterflex reflect our deleveraging. space ended our through exposure unwavering will cash by the reflecting flow and

Tom Szlosek

Thank Michael, on starting morning, I'm good you, and X. slide everyone.

XX.X% of As to growth approximately leading organic this year-to-date Michael was growth noted, XX%. quarter, organic

achieved improved a materials three the COVID Americas, X% the to of enterprise. from COVID-XX which organic as nearly know in growth growth regional consumables, revenue sales organic sales From the sales consumables, driven mix consumables a about drives less core by third nicely nearly and favorable services. driven single-use double-digit organic in core perspective, support Proprietary third-party and quarter and in growth consumables, those X.X% the production growth XX% Americas, and approximate by which times estimated offerings, the global organic of biomaterials Biopharma of meaning lab margin XX% XXXX. sales rate you grew Our represents for the vaccine. including procurement was X% production rate materials chemicals annual approximately biopharma rate, tailwind grew of and growth

quarter. recovered achieved included the COVID organic and of formulations silicone proprietary annual strong diagnostic elective X% of modest biopharma XX.X% limited revenue which proprietary of and sales vaccine-related approximately Europe, production which platform record XX% represents Growth growth revenues were demand XX.X% fully growth our achieved biomaterials. double-digit the for sales, procedures global as in consumables, offerings also We in by lab for driven biomaterials COVID representing demand offset headwinds. a from from EMEA, bioproduction declines organic testing, in especially in our in manufacturing. in revenue offset offerings growth, semiconductor tailwinds COVID anticipated resulting was by quarter. by net driven Growth revenue in achieved global approximately for sales, annual

product bioproduction, Demand and well to shows for our higher and continue driven biopharma quarter, production organic growth chemicals. single-use revenue quarter. in in in be of year. open the group approximately which of third the Biopharma, X, slide roughly to growth beginning XX% the in patterns double-digit revenue, move XX% the organic our end by XX% market as now organic consumables representing are by growth in growth experienced orders than high-teens annual exceptional Let's production growth as impressive including

diagnostics revenue, by Healthcare, represents research mid organic the by revenue market record government, in driven representing approximately Education the biopharma grew XX% the our declines lower demand silicone surgical our reopening. quarter. growth, a side, sale. by single-digit end revenue, in organic and XX% of low for supported revenue mid-teens, the single-digit customer third by approximately our offset COVID testing On lab experienced market, elective the medical-grade experienced in annual annual consumables of and driven which offering

personal by organic protective research labs and test declined kits our of K-XX market single-digit low equipment. achieved XX% growth, in and broad-based Advanced annual COVID-related driven single-digit university in biomaterials approximately especially by high-teens revenue applied production consumables recovery of offerings and sales for demand platforms. driven strong revenue, research Government organic growth activities. materials, and products education mentioned materials lower on growth technologies biopharma for revenue double-digits representing high Our ongoing lab a manufacturing. sales consumables EMEA and proprietary single-use well and earlier, our in chemicals product our QA/QC group, our and electronic sold in semiconductor for proprietary by achieved By driven and as chemical formulations and as growth Europe I by as experienced materials

year We and equipment in driven double-digit with growth Americas growth lab a services. by instrumentation Services growth had prior our in production a against Europe and mid quarter, global and favorable also comparison. single-digit strong achieved portfolio good both

for performance The Let achieved adjusted financial X which entirely metrics. EBITDA almost to XXX period. growth me XX.X% basis key was by expanded gross the XX% points to in expansion XX.X%. margin from turn margins, We XX.X% and prior to margin expansion rate driven slide approximately in comparable of

were Adjusted in continue favorable mix, ongoing activity. our and materials those earnings growth third-party superior proprietary interest consumables. management up again reduction sound deleveraging and our share higher-margin debt a materials and and consumables productivity, and We to from performance strong our once refinancing operating per of to reprising and XX%, relative reflecting generate expense, rates, achieved $X.XX inflation as

higher-than-expected well an expense XX% effective the higher of full the income for than by credit quarter, as tax a tax U.S. did planning. approximately to the tax was reflecting have as year, impact prior now the of year, expected our catch-up driven XX% Although rate the in rate we deductions

XXXX in reflecting in costs, Our a from cash tax be onetime decline higher $XXX investments year than in higher driven capital full rate expenditures growth-driven period. related income the define comparable and Free more the cash expenditures support the initiatives to the previously cash operations, mostly for acquisition Cares capital million, was less growth taxes provisions, compared to double million non-GAAP million we XX%. expected working $XXX The prior and excluding as quarter, to our of was Act to $XX the more financial by flow capital CapEx. expiry was than which measure

We continue to forecast $XXX cash year. million for flow free full of the

third fourth XXXX, as from in X, We sales Michael represents guidance raise the to the approximately core slide to to growth our quarter to this reflect are guidance XX% approximately confidence which and expect we includes of indicated, Moving year-to-date XX% strong end tailwinds. the for markets performance, year. This year raising our COVID-XX outlook. stable now organic for annual X%

for our incrementally XXX COVID-XX XX%, business tailwinds a from expect reflecting strong a slightly We of from to a benefit income in approximately FX We're incorporates growth accretion and modest from M&A to out million fourth by played interest share evolution approximately than from X% XX.X% has and lower X.X% including from which full the over roughly the increasing of U.S. reflected from guidance diagnostic projected the to from organic basis dollar, Masterflex. impact in points, are vaccine-related year. course growth and proportion and full The an currency which tax of basis foreign momentum Ritter Masterflex year lower continue quarter M&A our the adversely also already for growth offset results, anticipate guidance. XXX stronger EPS proportion adjusted expected. impact prior previous points the We EBITDA translation. full rate The year and This up continue expense approximately adjusted of testing COVID-related now total headwinds core of we estimate new are revenue margin to was estimating per year-to-date revenue higher expected our year reported impacting $XXX earnings Layering in margin in guidance continued higher more XX%. of expansion approximately includes of to XX.X% a into modest of approximately tailwinds the XXXX. as

by are our end year $XXX million. the approximately full cash $XX guidance We of maintaining free quarter raised we the which flow at million second of

from reflected growth noted regarding expenditures EBITDA ended comment improvement our upside flow capital and final times leverage, working offset initiatives. in We support as our at investments quarter cash in the earnings by expect an be and EBITDA adjusted the third guidance the higher in free capital to we X.X earlier close X.X EBITDA One presentation, to X.X we equity proceeds issuance times in of times The second leverage Upon in adjusted quarter. million in the we received EBITDA. calculation times $XXX from the September. the approximately transaction at the the expect the of X.X end the debt net conservatively excludes to net be Masterflex-related adjusted Masterflex

our and four to now XXXX. business in our are in cash generation to the remarks. my targeted attractive leverage over within Michael. confident capability We are of This EBITDA concludes range to adjusted hand back committed prepared model time be two I'll the call

Michael Stubblefield

The and Thanks is relevance create better mission to in and XX. Tom. business. on evident of in in science importance year-to-date core Model momentum now I'm our a overall setting strong of Avantor's the slide performance motion the our Business our world of

EPS committed including ongoing evidenced cash We Ritter continue and Masterflex. by expansion, growth strategy, flow and We to the as our integration RIM remain and Bio results. well margin our growth of execute soon free to

as manufacturing biopharma and We're our our customers our company sustainability capacity. key in and support advancing platform. will Goodness committed ongoing on to for growth our continue to through initiatives focus will investments a Science for also We driver

growth As and for and for in another of well I operator important. we your look of year the in now portion are breakthroughs more our the positioned been solid scientific end across never it begin each for expect will over turn to I our enabling ongoing to markets ahead, products you and your thank call. interest want we deliver XXXX. question-and-answer Avantor of in services to has The support. to Avantor's role continued

Operator

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

open. now Your line is

Tycho Peterson

certainly Hey. EBITDA margin to impressive. the morning. which expansion, was start with I'd like Tom, Good

inflation much initiatives? about on Which Can how of just of maybe gross some You was you drove most talked that of maybe productivity it expansion? and mix talk from margin versus management. the pricing

Tom Szlosek

Yes, there, we different a times third the the had was of points, we I we which, think our growth for Tycho. say in said said, to Thanks the as products, from favorable mix growth most we for margin products a It three -- it's of nice margins, mix, said. The you're an proprietary mix. very and be was The almost combination the that's growth in basis on and gross a the question, not Chevy. in as continues party a driver came as equal three with party EBITDA expansion. growth third us, mid-single-digits to items. products referring XXX about proprietary We was to said, well. It of as as

was it overall favorably mix. So the mixing on sales

that was, price Secondly commercial managing contribute accretion. impact strong margin did you of COGS, a the to over had

modest inflationary the gross thing the impact. to three that. in which from margin. were initiatives, impacts were through and have commercially And say that means, did productivity margin other on COGS offset I'd ongoing course, But was, we third those we a our equally volume. able of additional the get includes leverage So and accretion the just factors weighted

Tycho Peterson

Okay. able the mean, quantify Are how gotten resin kind are contribution obviously, of aggressive of -- or that to I cetera, question. pricing, costs kind you going to the I input is with have to the customers, pass more to the was? of spirit guess, on pricing much able what up are costs, et all you of on you able you

Tom Szlosek

Yeah.

some matter, and in of different. for fact, we've pricing about start experienced and the been quarter, talked proprietary mean, against strong our acumen -- we've look and chain the experiencing well the our no the business challenges. -- at as this over history you party product in if have, inflation. in supply inflation you in in that third we the think or between the I the balance Since that our years, as we the commercial managing I cost both doing business, inflation quarter was

us quarter last it's the if scene the so. emerged for not it's or on as in So suddenly

And we its in continued the impact in of cadence past materially so in contribution uptick has modest was I'd pricing of to say say been different margin. with the wouldn't that in work this inflation quarter the to quarter. have any terms even overall that I was COGS here And than the it's gross over

Tycho Peterson

hear about gone if then more a on separately, I'm you how X% O&T, integration scanner M&A Thanks. for launching in noted and quarter, strategy And Ritter curious the RIM to And know those Okay. or curious sequencer. two? X.X% performance, for around a was comment could bit handheld but a the you has so little that? to Michael, then just just I the on

Michael Stubblefield

Tycho. acquisitions. both Ritter RIM are Thanks, Obviously, days for and early fronts as the going on Integrations both expected.

to for have require pipeline a in on. which applications and we are qualify In positioning teams modest in I we've line products by somewhat presenting applications integrations Similar but excited products, processes, proprietary into saw we a channel. the and COVID-related we think, and got of ahead their in new quarter, in COVID to our those these offerings, as to our performing customers with that expectations similar of other German playbook momentum busy expected customers. a our excited for both somewhat think, the those for business is So, Ritter, about which the trend roughly into a the are pretty as pretty in in the of have acquisitions, with we're decline into business, working certainly by low revenues our full own have our these we the these in exposure, these sampling is our opportunities qualifying momentum offerings and Ritter We're I our in plan. channel perhaps now our and specification and driving products integrating sequential driven capabilities

of pretty those where about acquisitions. we're at So both excited with

Tycho Peterson

second thing O&T? The

Michael Stubblefield

of great this channel. channel of I The the there's it to around just technology a to another we have our again technology second our and our model the on it's another the a R&D our of an desktop, gives excitement interest that Obviously, example in of O&T, highlighted through internal seed reflection whether around our we've and the remarkable our power on our innovation our channel. the our lot forward bringing step opportunity and own the the the the from their innovations had being and access third-party innovation through to capabilities. our partners showing their see question power think, uptick role of through of we innovation market -- world the and sequencing that partners to of that early represents able the standpoint. which focus the given And labs do technologies relevant tremendous to and customers. partners from really important in channel ecosystem And we alongside innovation And our access that launch we in leveraging our it's to the bring of just days just or rest content play our as once

Tycho Peterson

you. Understood. Thank

Operator

the is question Bank line of of from Derik next de from Your America. Bruin

now is line Your open.

Derik de Bruin

Hey, good morning.

Michael Stubblefield

Derik. Hi,

Derik de Bruin

Hey.

X% X% XXXX. So is target just it down think XXXX XXXX if going you're be is looking versus be that base When or we're contribution you COVID, that When to could long-term XXXX? not put know, COVID is that expecting specific be down -- is inclusive there, to I guidance, COVID something? because to line clarify you XXXX you to the just plans be objectives. Your you at -- in but business, of giving that out underway in XXXX about you could your that expect mentioned with

love some on clarification So that.

Michael Stubblefield

to start. Good place

it you're on. way is spot think I the thinking about

a get bad year. the think more January. to would single-digit As guide way be next X% from revenues today in at downturn for in into We'll we you of that inclusive our and durability we we'll that roughly one. COVID PPE that specific a get that for a mid line this move enjoy model business and next contributions about bit headwind headwinds against ongoing we vaccine in expect Diagnostics. our year. would next in do next sequential decline would and for not we specific probably of of single-digits can year reflective confident But in little that I when headwinds of to year and long-term the our as we the would the Day, that be talked targets mid we Investor targets reflect and long-term be we more COVID outlook, absorb And at expect our we But feel with deliver

Derik de Bruin

bullish. I issues suppliers customers not mean, like your your any Are having those channel? chains any pretty the That's having Along shortages lines, -- or in Great. delivering with just issues that? you supply there or weaknesses

Michael Stubblefield

that Derik, there in but of wouldn't of they availability, categories. say been are I'd improvements I of different PPE year, necessarily better and seems throughout things acute for seeing or say than of some the seen starting the in and categories. plastic the are, it see that months. in that has we've supply part short different like We're some to improvements more any XX certainly We're those to availability wear some move some from

levels, some Some continue example go be high single-use into growing into to double-digit of residents, well of the have constrained. offerings the categories the persistently been some like other that for the which of

today, or in are is the we've constraints than any moving. facing But everyone some certainly certainly not different there whether US business leveraging our they're and a labor we've of constraints solve the at seen wouldn't those throughout but doing product things bit levels year, great from previous I basis, much of ABS certainly, a are managing that teams keep and a than are toolkit that it's through the it's So experienced a different problem balance, and on the say but quarters. real-time availability, job, the in

Derik De Bruin

year your – on one are for share expectations just for What's the then QX given housekeeping the Tom. just question what And count equity raise? full Great.

Tom Szlosek

Yes.

the know, green XX shoot, came $X five the from $XX mid-September million the share equity that by XX we because did transaction, about to related including shares we offering, shares billion in but with on at about in price, you As the raised that. the Masterflex the came of on roughly that oversubscribed raise million, that, exercise were which times

to we're is So reset we XXXX, reset count. as Derik, do going share this adjusted what

includes we've conversion adjusted maintained mandatory our that of number preferred you As stock. been the share – count we've convertible expanding presumed for know the conservatively

So all has in even have count conversion you reporting mandatory X.XX, assumed to our around the share convertible. we've discussions averaged X.XX, that the though for purposes of of

the the behind what's to we've count is from adjust of the shares reflect that well minor happened. we'll in as as share So But X.XX changes X.XX the that Masterflex, used. issuance other that have

you Of the the outstanding on GAAP see can in shares base always a course, our XX-Q. basis outstanding shares, diluted

Derik de Bruin

you. Thank

Operator

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

Your now open. line is

Vijay Kumar

print, my excluding high guys. question. on commentary was for the tracking prior Hey, fiscal base Congrats is the of on the shouldn't XXXX points just question for year expectation Derik, taking business assumption COVID, to – perhaps I the headwind digits? thanks so clarify next say and Michael your two is from from of single the inclusive is COVID tracking or

Michael Stubblefield

reiterate again Investor of certainly Vijay. or happy we then, The Day next clarification said there today, there, two last guide we our Yeah, provide last has we of years, for is see playing the which year, roughly headwind we've points year. several inclusive is line with would consistent the that I and to mid-single-digit some two about been at what business COVID the – how with target out that for think growth have we the you're us. as the there of include think been each business how I And in running years, core talking or outlined over including that this three delivering

to think bad it. a way about So, not

Vijay Kumar

Got you.

the remind fine-tuning to headwinds range at in of So similar higher and was know fiscal so you Can tailwinds I sorry. And for XXX vaccine? COVID be – fiscal into inclusive is the XXX. prior excluding somewhere now your others peers? on XXXX One, -- headwinds, And XXXX? and the five, percentage so or should itself. seven-ish And we're base. XXX, COVID we're us What vaccine around what percentage diagnostics probably is tailwinds to

Michael Stubblefield

Yes.

in the think playing of look we've what the XX% I aggregate Obviously, of you that becomes the at to year, move to kind the diagnostic across testing And vaccines of well time. we XX% it's PPE out if we as year. mix and to expect that to capacity to about, both throughout durable view ramps we've is available been that as So, here. balance is as are just that or to into would benefits internally next in roughly getting XX% with here we're testing the Roughly production PPE. diagnostic and majority we of line described bring be talking as XX% vaccine and some our the the we the globally over tailwinds expect as expansion increase from with And move we've continue then contribution our being and vaccine. our we expectations, year said as continuing we before, move decline on capacity production as for as more forward line

Vijay Kumar

you. And base of what share be -- that's so another around clear share the just Tom, is on what X.XX you're X.XX, count? that Got something plus mid-XX Is XX, that. just like on saying you're to pointing count, to

Tom Szlosek

Yes.

have know continued X.XX. As units other X.XX used we to kept IPO. it ones that the February. flat been the we've that in you cover stock as Masterflex for early simplicity the we'll since And equity it update to haven't restricted X.XX the and to there the Vijay, guidance baseline be IPO, as late option transactions purposes, since We've mean exercises but minor we'll just call transactions other to reflect January, I in happened. the I earnings have expect well any reflect -- like

Vijay Kumar

Thanks guys.

Operator

Dan the from of next Your question line Cowen. Brennan from is

open. now is line Your

Dan Brennan

Thanks for taking the question.

looks bioproduction, give order obviously us so revenues like on business? on what off orders. color solid what growth ex us particularly you're revenue and Can like seeing start give for flavor that both the on to a And biopharma, that number side? COVID just and you in wanted for some just Just

Michael Stubblefield

you to core so remind about that, as overall well see And see the R&D start roughly great biopharma market of space. is of our continue biopharma very, to we our is quarter strong as XX% end into is offerings part to momentum in as the book. at of revenue book revenue that to very R&D grow. continue business portion in XX% business very one-third levels a activity at continues captured to correct order in driving with our the where is labs growth of we just our you're as strong just return And prepared and there of to momentum in Yes, see two-thirds continued our production. the we operations in of Order the reflected growth more then under very, higher normalized growth platform remarks, roughly strong in bioproduction,

the previous As the antibody we've to in bit is order continues our our a in dominated into core I cell of said for that continues say COVID. on would day. day be fact quarters by roughly by to is we're therapy and sitting a quite platform, that unusual book and offerings it of book core which unusual XX% over Interestingly, makeup or our monoclonal open business to business. year related order grow of gene orders excluding

given expansion the the we're as well and healthy positioned COVID is both that revenue momentum we in platform. in quite well margin both exposure. vaccine business core the and But great at production ongoing obviously a growth to proprietary So, have that of as portion high contributing capture of the benefits organic offerings overall the level

Tom Szlosek

would Michael Dan, add also said. to And I what

in teens biopharma the by a-third at driven base was COVID. you look high for quarter, two-thirds of roughly growth the was and growth the the If business

Dan Brennan

just one pressures, Tom. looks given it you, government. kind kind maybe and was And of COVID under Thank the Obviously, education slowing. of government of natural the like just on the Great. some

quarter pressure looking would fourth just and education just pressure against that we're is into a lab side, as the there, we the XXXX, maybe outlook given as access, juxtapose alleviates? the ahead, tailwind what lab nice environment get On that from as the we're probably some be funding wondering near-term in

Michael Stubblefield

with the third headwind education education, the was Government year COVID-related XX% is didn't other certainly that things in being in our period revenues testing in that of PPE and in prior being of a the for reflecting for approximately like two-thirds government. business strong quarter. enjoyed revenue really portion this diagnostic repeat So our of government we the us, particular

government of education the our of overall kind part and a on X% which in year-over-year contributing certainly the platform. education then a I level growth sluggish. education basis COVID university improvement On there's reflected at continues that see there, be front, business, characterize quarter what the of is the platform, while as And the single-digit some portion science continued headwind in roughly low bit to that to for of in And we lab utilizations. do level of

seen United line across really of We expect K-XX this the pickup haven't districts for a year normally at with in we much deployment what curriculum States.

So that they're the think, of in deploying the I in in comps business. role And next given recovery the things government prior opportunity year periods. pretty the governments portion COVID-related be just we're, is for that education with that how are developing will played running probably portions, offerings some But there around going next world in into tough pleased year.

Dan Brennan

Michael. Great. Thanks,

housekeeping one Just item.

or give number? Just base make that that XX full range? ex-COVID XX just that's to XQ what's sure for right? year Can the us doing the new we're Just implicit organic in you

Michael Stubblefield

Yes.

for For think to going I -- I X.X% out yes, to correct but, the QX, works here, it Tom, say, quarter. me tailwind was

Tom Szlosek

of of quarter to our COVID-related high XXXX recall, was close mark You revenues. terms in

the year, and while have the durability in in vaccines because of testing reduction peak bit the the as continue diagnostic the QX a the starts mentioned, as durability next usage. impact had Michael we'll of PPE As to to well have turn

Dan Brennan

you. Got it. Thank

Operator

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

now line Your is open.

Jack Meehan

I most And was just like Europe, color thoughts morning. get to like It Ritter Good this track below thinking. Do still a just the more at it Ritter. little for wanted they're I on what question, of you. so. looks the M&A million in feel start, Thank look I came $XXX of other contribution you sales or year? $XX on bit of a little one was geographic on then expansion. million M&A

Michael Stubblefield

to hear Jack. questions, you morning. Great from Yes. this Good

we continue of responding acquisition excited only going of think, the As quite months I earlier very about to Obviously, very, to a I Ritter. be mentioned, integration is into one we’re couple the questions, and well. here

back was exposure would bit anticipated accelerate it's quarter off we've and quicker coming it's -- our had us I in have think XXXX market COVID-related the with into very there, we what exposure line to it's we And we to core initially enabled a in announcement did we modeled time about continues as perhaps And at transaction that at got anticipated. think, kind there to range. that relative business XX% the we applications of acknowledge had than the exposure, the here, the that synergy think But of XX% talked go I period I time, had end that third in strongly. modest to the market probably a somewhere as capture. we come to off if of we the -- run to

able more capacity customers stocking initial might devote You towards be to samples channels. for of the in and our providing volumes

hands world. these about our very So in teams around healthcare products aggressive, are the and of the biopharma customers placing being our very energized

specification-driven. I mentioned are products As earlier, these

process you a So ramp can to sampling commercial of you multi-month start kind quantities. in before have qualification at appreciably the of synergies

Europe air of seeing as in -- And of legacy time, is inventories contributions you're efforts we in growth supply in so start well support with the well to reflective we business. chains to seeing the really lot you outside what kind seafreight the of to of in get quarter A have stocking outside should freight Asia in as the Europe of as that the position US there in anticipate. success channel. And in over heavier both our as third as that see

Jack Meehan

any whether outpacing the That of hold. question historical growth algorithm just in sense. lot XXXX, it. on your There's initial third then parts. obviously a around makes Got another should And of thoughts party planning, just moving proprietary

think margin to for about trying implications expansion. the Just

Michael Stubblefield

we typically think that organic Conversion revenue and offerings. to historical to in play year mid-single-digit continuing see our by two have comfortable investments reason growth don't part this why is proprietary and our obviously we've as made see we any wouldn't that driven proprietary year times strong we're We growth. X.X out of very EBITDA I of with in next in that that well. with the this very, range the momentum that

Jack Meehan

Great. Thank you.

Operator

Your of from Savant the line Tejas next question is Morgan from Stanley.

Your line now open. is

Tejas Savant

taking And to guys. given margins on in through can well particularly or Good distribution on delivery was confidence costs? Jack's you deterioration and somewhat morning, the passing earlier thanks metrics ability guys here. I you sort the for rather – related of rising freight on your curious for on XXXX, questions on all? Michael, any your of in Hey, comment note, a question just inflation as the on-time at are side business, seeing your

Michael Stubblefield

just as show as the for job Typically, point around strong inflation better On process year. this of We've price and or year the compared clearly, above quarter. years, And management, means, certainly market a adjustments well both busy suppliers questions. offsetting there managing nice started year. as indicated, environment our little didn't to the up trying driving here, on the reflect see your quite this evidenced it the bit at get historical than this to front. pricing large focused previous number historical into the rising as the market – cost would It's as trends a getting early earlier. is and say, I are the folks material higher from done in seen effective that these And as And year on of the side New great of probably to of ahead teams that the Tom you prices on this has one and execution time you escalations and expansion raw the as is going of we get part Yeah, the see Year. first wage team the as the into they differences most well perhaps this year can And face. by third the the team the action the including in has team been of through our has margin levels. a inflation

business customers the of And choice, and on which where offering our the so about with of to as pricing of customers flexibility alternatives here think, advantage communicating of channel our we're offset really well to in our presenting, very one have as provides active XXXX a inflation. number branding, is here model take some of the flexibility is strengths inflationary in able that trying being we're with reflect environment reflect year manage next excuse see. conversations just we the environment increases the to and do. customers macro to think price at going I our inflation are the we into comfortable that given stage maybe in me But this net-net, will historical able be normally the that But backdrop as to or than to that this going we're be higher I year

Tejas Savant

delivery And it. question on metrics? my on Got

Michael Stubblefield

Yes.

strained of we are chain demand. months over a I the constraints. the seeing our impact the has rapid that given many where lead-times and been have out our certainly reflect run the is for up pushed the deterioration of to we've in on-time last products necessarily seen say the metrics So, supply XX been wouldn't

keep our than the in levels. And But lead-times maybe have we which well. of reflected most up not chain those order holding for lead-times to with our the products pace increased historical with that so our gets against able certainly book supply is

Tejas Savant

facility final is on single-use us North in the in one Massachusetts Obviously the you very it. recent Got capacity Carolina? you've recently. but at can give site for And other Netherlands utilization expansions and one your a announced capacity sense

Michael Stubblefield

the the what and with site acquisition Europe backlog of we've for next China has together more year the from greenfield at organic increased than use. the fourfold couple by clean significant. kind look is capacity going The Massachusetts in Yes it our questions. to as demand great done you Devens lot the a launch recognize technologies Carolina which of over our When in an in But here site is give as both have needed of us we well we're in both this been North here growing expansion single growth our was to room years. significant flexibility of

solution the give opportunity ahead clean brings. are in integrated room complementary the prepared our busy. own nice existing the capabilities transfer business and offering on capabilities incorporate some in tubing into so be about a fluid the capabilities And end-to-end technologies. going And Masterflex that acquisition integrated aseptic have there we of with complete that's side a and footprint Masterflex complement that our and will then that Masterflex to look factories assembly here And single-use us our our pumping are we to to when for we when quite remarks talked the

yes single-use developments we'll of and the So, the excited we'll about no the our are doubt pretty super have factors that market offering give to good. business we're here. the But our capabilities that

Tejas Savant

Appreciate Got it. time morning. this the

Operator

line Citi. Your Donnelly next question from from the Patrick of is

Your open. now is line

Patrick Donnelly

early thinking talked the going things there where and leverage next mean you questions. a just are year. about obviously before to be about you're But are the you guys for on just right closing. side how you where after little bit little to is Masterflex at it pipeline you heading Maybe how below a the Two want you about bit the this I with active next Tom the a activity? little And Is look certain be a threshold deal? where M&A talk maybe now? deal

Tom Szlosek

our be we take Good Yeah. now, any MasterFlex, morning comments, thanks up prepared obviously to day will leverage Patrick, said and it for when bit. question. we as close a that in expect I our the which The – really

I think the as of X.X% range. it

X.X% take think so. last enable to our believe We turn that three demonstrated a it's cash in my off as year But full flows in we that I of range. us said very years, the a that in prepared will rapidly or remarks. I

lab some as that not well we're the accretion it cash times proprietary at feel in. We much that in of about obviously, than and roughly to in attractive types very our you going squarely the our talk and want consistent about less looking boat. beginning terms the when we're on production, billion said, with the M&A top a like on unique the by of talked to a closer get particularly as four well to deploy back us in where EBITDA spaces, from that capital of service margin range be want on keep think of same in position would before. two we with We're as adjusted we're a we shareholders all leverage But biopharma those disciplined we're achieve as And what acceptable returns targeted leverage four proprietary. us of X% of of business, at the at those range. We the not our XXXX, you $X or workflows X% of give ourselves able at targeted a in some we've and to We this times about end if or perspective. So, line in talk different and range are of And things in do We We're opportunities. way. we're the leverage to attractive we're to hurry. and year, of up middle flow. are the to as were to look debt rates areas invest look our

but on and So, fully focused our with target it's full think we're idea four between I as leverage that stated EBITDA. ahead, two to the levels times steam getting well

Patrick Donnelly

Understood.

Technologies Advanced I Materials, you there. through any Maybe in then there? seeing the And maybe biggest you're piece seeing pieces? just in And of just of you nice the what more on a industrial it. Applied Okay. But an slowing Michael, know result difference talk pretty on and industrial not obviously, geography the just out core are in kind markets? update those Can

Michael Stubblefield

and support nice in that and US. manufacturing in on producing wafer in of at the especially looking at were having quarter, would the the we In Yeah. consecutive notably, fabs maybe to in the third I that high momentum around We would the a most given the But through there. three in quarter the lot here, to EMEA in of out that that out a see the and with saw trending the we nice second No, of all a was improvement level, had we Americas obviously, world. attention in build. single-digit semiconductor here year, growth. the sequential say, a uptick as to continuing chip macro kind just levels, impact the formulations I And the are a of see Asia we business in and particular, but we nice we've progression of regions really the region line in we pleased And progression maybe gets that's Europe saw. the space record moved have shortage world, say call at business had

I us positive backdrop, overall say, fundamentals would good So for there.

Patrick Donnelly

guys. Thanks, Great.

Michael Stubblefield

Thanks.

Operator

from from of next Catherine is the Your Baird. line Schulte question

still open. is line Your

Catherine Schulte

Hey, I guys. and Thanks on for guess first proprietary question. the materials consumables.

had side for of down COVID long-term growth high-teens you rate strong versus break how think of that You Can just the another quarter core about growth. that between here and kind with your portfolio? you

Michael Stubblefield

the Yes. almost XX% XX%, Catherine. Thanks said proprietary. which question, I as look vaccine-related when our we roughly mean at they're you for entirely is offerings COVID

XX% higher The third-party. has proprietary That of of the other area diagnostic piece there. it a mix testing. XX% -- There is is some in

was we So to when COVID probably proprietary the you -- the go rate overall growth growth the for our you overall XX.X%. of similar saw high-teens what talked impact in growth about to that

So I'd percentage roughly points. a say couple of

Catherine Schulte

assumptions the the like there. million are close timing And assuming there. in somewhere on your about you $XX around deal curious the contribution guess expected I Great. Masterflex get then maybe Okay. fourth but just some around It talked guide in and what revenue now just to the maybe contribution assumptions seems quarter?

Michael Stubblefield

inside a getting you assume spot have been what we expect for That You're here? quarter. in pretty close. imminent Catherine would information on the very fourth of terms

we've roughly So And of as you it talked line worth about. what in much that's can with pretty think revenue. of two months

about calibrated it size think the I Masterflex. on what you we based talked of probably

pretty So be yes, quickly magnitude. and it contributing away that will taken here in

We're us the are quite As rate. in to you impact margin margin accretive attractive term certainly starting good looking the fourth forward quarter. rates the bond know for to

Catherine Schulte

you. Thank Great.

Operator

for That back presenters Q&A it our to for closing will hand concludes our today. over remarks. I

Michael Stubblefield

for everyone. your in our today Thank call again you participation

my steadfast customers excited looking As customers success. of values really hard take then are and our day. our our deliver who until gratitude we opportunity long-term and future and be safe working our Thank associates And growth to we everyone. close The our every strategy our and I to I'm up our express we're want care to to and you. continued about each to an mission around to forward overall critical and support meet the certainly get is when and you resolute world updating back. serve

Operator

for you Thank call. conference today's concludes attending. this that with And

disconnect. You may now

Avantor (AVTR) 29 Oct 212021 Q3 Earnings call transcript