AVTR - Earnings call transcript Q4 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 Fourth Quarter and Full Year 2021 Earnings Results Conference Call. All lines have been placed in mute to prevent any background noise. After the speakers’ presentation, there will be a question-and-answer session. would hand I to the Now Mr. Instructions] like over to call [Operator President Investor Thomas, of Tommy Vice Relations. Mr. may you Thomas, begin the conference.

Tommy Thomas

Good today. for joining you morning. Thank us

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

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

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

Michael Stubblefield

starting slide joining good us three. and morning, appreciate Tommy, everyone. today. I you am on Thanks, I

by revenues reflects more COVID-XX with in be quarter, pressures, plan momentum press across end favorable saw and that another testing including strong disciplined delivered points, we demand impact on key in with markets, applied expanded the vaccine-related our year continues an associated XX%. in all you of associated improved we release, metrics, concluding financial execution revenue As strong above were outstanding acquisitions performance our Despite strong sequentially, basis testing guidance, with double of mid line adjusted variant. and our diagnostic Omicron continued of technologies core more revenue materials. and to margins reflecting the increased our with advanced strategy. biopharma cash end XXXX. driven achieved flow by continued markets, we EPS value than growth, single-digit the two than our XXX inflationary the and fourth largest our quarter, growth plan strength long-term operating digits and increased grew In Free and in

and facility innovation drive for the growth In manufacturing hub in in ingredients and European We and recently enabler of potential site logistics expansion kits single-use applications new be Netherlands In in addition consumables track, to strategy. of Ritter are second upstream raw finished mass integration new spectroscopy manufacturing solution. downstream significant growth chromatography our area, in we good a the of new our agreement both to extensive development commercial with these to with serves and products hub workflow. in a scientist’s near growth scientists key Boston we Inaugurated customer and ongoing the supports Agilent’s the markets initiatives the our bioproduction goods in and critical line all Masterflex introduction agreement opened our strong our more research progress of element of quality used our Most across and liquid and single-use single-use Massachusetts. announced generating strategy pace are with Located realize integration. with we logistics paired process the executing single-use made progress we capabilities. Bio these our November our people enhance to double-digit is capacity, will investments a company, transactions. is quarter, remain fast-growing results synergies and distribution, our the sample advances. financial workflow and storage, helping also Similarly, material from as the our remains keep biopharma applications. realize of fourth An for starting notably, making important revenue, driver closed advanced to with a with The the to to continued provide than growth quarter, in the the access acquisition in our and platform. content long-term to control and of and on preparation of broader our of RIM growth end in XX% breakthroughs relationships continue content the key we and with anticipated our Agilent Representing our in solid commercial provide that can the center customers

ahead poised at year we Looking great to XXXX, for are Avantor. another

remains than share continuing of growth. mid-teens M&A free as our book earnings acquisitions, materials recent growth hard our margin organic more Consistent in would opportunities. adjusted consider $X billion XXX And momentum our work single-digit per EBITDA points proprietary we you integrating adjusted the to mid expansion, are in order while cash and and in at expect, flow we future markets We long-term end more than for basis strong. expect with algorithm, have growth, good

fourth Moving financial contributions a to revenue summarize four, Ritter on reported the basis, Core X.X% Bio, on and basis quarter I’d organic nearly on and our from Masterflex, currency headwinds. offsetting to foreign like including revenue impact X% of slide RIM an results. increased exchange

end driven and advanced testing headwinds reflecting growth revenue. year-over-year partially was an From including by perspective, our reflecting As Education vaccine-related performance impact favorable products, system. and materials, quarter, EBITDA enabled mix, Similar year-over-year and than declines more proprietary basis of double COVID-XX growth M&A. execution sales The which quarter XX%, coupled in our and absorb diagnostic Healthcare Government. expand raw and third to experienced revenue approximate X%, XX% materials, market points, on operating transportation an third-party Reflecting business volume cash consumables, and to of benefit inflation working margin the in digit in and declines were XX-basis-point anticipated, strong resulted traction approximately capital share more and testing performance the strong in quarter the we was of productivity, results, continued costs and production. our organic by $XXX of applied single-digit growth, in revenues, wages, core outstanding bio and adjusted PPE-related low Avantor COVID-XX by EBITDA technologies we borrowing growth revenue strong lower able earnings and from than including biopharma, free in and COVID-XX growth Adjusted mid to the than adjusted still and by offset net both offset XXX of in with income growth capital more partially initiatives. investments income of in growth generated on XX%. was flow million We up XXX% adjusted higher materials growth single-digit over support mid per included in PPE taxes,

billion net quadrupled in leverage ended initial at our growth, of just doubled overview capital and Compared adjusted X.X nearly adjusted EBITDA about EPS XXXX, our $X year year. adjusted during we margin same to full an from doubled the the essentially provides more expansion guidance, XXXX. for results organic growth. Our times than Slide five point deploying flat M&A EBITDA, despite in essentially the

lastly, X.X% COVID-XX On points interest free and full to progress yielding growth to of continued on results, growth growth XXXX, For adjusted XX.X% in were sales of more income with million year, than by flow the able operating expand cash XXX% EBITDA, our conversion in tailwinds, including combined M&A. core grew The margins included basis XX% for approximately basis expense, XXX organic EPS. points, we X.X%. approximately resulted income. adjusted XX $XXX net And in tax adjusted reflecting in

more In enabler the relentless strong continued and reflect M&A beyond. to turn cash of over Tom I our financial exposure and detail. associates summer, in rapid our high X,XXX our space business value confident an important team’s year our results through outstanding that, is growth more our Our by team XXXX biopharma me extremely XXXX of to With remain the execution, system. it our and I Avantor in enabled our to on supports for model, results financial outlook another deleveraging global you focus free our of business of walk significant and proud the let was than strategy. am and flow

Tom Szlosek

you, everyone. X.X%, in Thank X.X% morning, growth I headwinds. six. and Michael, good am on Organic was starting the excluding COVID-XX-related quarter slide or fourth

final which the year, exceeded was our of guidance. high-end For the XXXX XX.X%, organic full growth

approximately XX% the comparison. Our X% QX organic X.X% full ahead two-year annual of of the organic sales, impact growth, perspective, global COVID-XX-related From approximately revenue growth for excluding regional the in meaning X.X% year measures fourth XXXX rate, represents approximately growth revenue was which a Americas, with both and organic quarter. achieved of average

single-digit year-over-year partially electronic organic our increased a for both our growth growth organic revenues strength growth the single-use continue in experience material. headwinds, Americas’ particularly R&D, organic our customers aerospace biopharma, revenue robust advanced revenue, and recovery XX% market, growth revenue representing labs biopharma demand, strong to government driven processed driven particularly continued in grade single-digit COVID-XX-related down approximately decline our Excluding in our silicone growth customer Within revenue high strong, annual more XX% driven approximately growth representing in Education bioproduction, base, In be XX% by for the slowly, revenue open end more of by global semiconductor represents annual as to the growth products achieved or manufacturing. by demand single proprietary of applied achieved the proprietary and product albeit in revenue ingredients the continued organic XX% than demand diagnostic remains for applied we the sales a materials and product Europe, growth lab Slide COVID-XX-related and demand technologies in declines lower materials biopharma from Sales Strength our semiconductor growth in the biomaterials proprietary of consumable quarter and applied in quarter, demand third-party growth, aerospace sales Advanced sales by XX% experienced QA/QC fourth representing Americas in our as well the tailwind, offerings decline organic implant as ingredients and content, expected. market XXXX. of services to in single-digit testing. single-digit driven our modest EMEA, EMEA, growth offerings double-digit increased mid-single excipients. negative and chemicals revenue bioproduction offerings PP&E growth experienced represents in double-digit quarter, of continued excipients. and offerings mentioned. sales as and materials, for and X.X% materials, modest mid-teens particularly declined double-digit the emphasis representing technology the XX% organic Government Europe materials annual single-use and which offering. mid quarter in our X%, driven by core work. fourth testing consumables use than December single-digit for moderated powered offerings sold quarter, medical electronic Healthcare, in and delivered our for achieved and in in than experienced strong in more COVID-XX-related with global sales. COVID-XX-related funding and the research year-over-year our X.X% platform fourth sales, and by their in by our and and in X%. more solutions, as mid fourth technologies testing growth Within revenue achieved by bioproduction high COVID-XX COVID-XX-related double-digit in of continued, revenue, by in ingredients. annual a shows approximately single-digit impact used ingredients, XX% previously up processed decline quarter, testing biopharma sales, offerings medical for platform. driven X.X% total high-teens proprietary growth net discovery advanced grew mid from mid nearly fourth diagnostic XX% core markets. Healthcare materials university platform, by revenue chromatography digits, offset and on revenue with and sales, headwinds. strength including bioproduction, and led education end and and in X% quarter, and as for COVID-XX in materials resins, and customers. business, Europe driven organic annual processed organic Within our modestly, our strong group, fourth continued processed lower by and approximately driven research which single-use of organic excluding continue COVID-XX-related were year-end strong group, in approximately K-XX which decline seven research consumables excipients reflecting annual offsetting by Bioproduction PP&E experienced quarter, of than from well and the By revenue, with approximately fourth orders a in as as

turn to growth our the key metrics. margin quarter, perspective regarding eight XX.X%. performance in approximately offer we expansion me In some XX% adjusted and to Let fourth points EBITDA over basis XXX of slide to achieved financial

interest the driven repricing XX%, Our reflecting refinancing expense of the Adjusted by commercial the reflecting entirely year. almost earnings strong $X.XX, XX% margins, EBITDA per quarter resulting margin excellence share impacts over in the adjusted again last from lower series activities the gross rate expansion and growth was were up from fourth and and M&A.

for but XX% XX.X% for to full our was XX% from approximate in roughly tax Our year, XXXX, rate improved XXXX in flat to XXXX. the the rate quarter

free For finished share closer flow year The of and by quarter cash highlighted earnings free benefits adjusted flow conversion X% growth and period. the full The was normalizing we million working fourth growth was free Free capital the driven $X.XX in year higher by prior growth $XXX of was for received ongoing adjusted to CARES income. non-recurring or support investments throughout the $XXX of requirements, $XXX year, net million, XX% flow over cash lower for Act XXX% as approximately capital the million, EBITDA $XX We to XXXX. million our to the cash increase compared well in per stronger offset the grew in year. the flow with other with cash in XX%.

XXX.X the count conservative earnings IPO, will per adjusted Turning forma pro will U.S. May the preferred the at higher share at plus briefly I non-GAAP to share is mandatory as IPO. actually historically EPS. the of conversion share to until XXXX that U.S. GAAP the to making for been with shares, since calculating XXXX. IPO. XXXX, the the adjusted used of XXX.X occur relative share wanted not Since count conversion of we than outstanding is of expected on time shares the the million slide nine, GAAP adjusted million the the share have our for time touch I This the has convertible start count the EPS conversion account, May occurred our adjusted our

two XXX As we have shares previously to communicated, we are changing the adjusted in share count reflect million to changes. XXXX

we shares period Compensation shares option issued XX, our Masterflex fund Employee reflect exercised amount an share adjusted First, no per an end anticipate increase stock stock XX.X of share an U.S. And million count reporting XXXX, the share restricted reflect increase year. shares in includes longer activity these changes, XX.X equate date. and the to to under the upon the second, vesting to XXXX, incorporating utilize of adjusted IPO count Stock-Based covers XXX the patterns count. estimate the to earnings GAAP the we of for with the known million XXXX, vesting will Program. for acquisition. share Beginning by This and partially historical the and based on expect By of exercise September we since million

in issued JPMorgan January Conference. are XX, was Moving HealthCare at to the that guidance we reaffirming XXXX slide the

X%, includes reductions testing expect revenues We sales growth PP&E. to X% diagnostic of headwind which organic X% COVID-XX-related from in from and approximately an

materials digits, of guidance of growth Healthcare technology digits in growth digits, and Education growth biopharma digits. growth and this applied mid-single and low-single high-single of mid-single Assumed advanced is of Government

headwind, an to approximate growth X% X% X% We approximately expect X%. revenue and to in reported of FX to M&A resulting be add

in achieve impacting margin favorable our most higher basis margin M&A, EBITDA to benefits continued and than reflects of rate. expect productivity XX% XXX strong of This expansion, We points more category. resulting pressures inflation nearly mix the excellence, content, ongoing from margin cost a adjusted integration offsetting of commercial

XXXX share, portion per XXX we the our rate. $X.XX We using forward $X.XX, XXXX. model of approximately representing and million of current debt the to yield XX% a for earnings at curve in interest variable a carries of forecasting share in both interest approximately adjusted range expense, For that reflecting a annual the million growth count are $XXX midpoint,

approximately Our expected tax is rate to XX%. be

support more again flow business expansions X expected cash working growth. adjusted midpoint once I billion, leverage remarks. our final to ongoing and in cash capital my free attractive at Michael. prepared CapEx to regarding Finally, representing million comment this is $XXX of the to by to XXX% XXXX. X the $X of call of for than we committed approximately conversion guidance One capability of target adjusted capacity be income. higher range approach over in are is our back Incorporated nearly confident our leverage, net to This hand model EBITDA end the are the and generation will times now concludes times of

Michael Stubblefield

and I Tom. commercial support and levels global high operating will at remain committed margin now with and in to outstanding of of relevance despite inflation. to the capacity our by year team’s end mission momentum ability importance our clearly long-term environment, make initiatives, and have due execute. XXXX investments innovation continued expansion, am am ensure we our manufacturing the We and another we productivity of our to we expected Despite in will enable growth that to growth encouraged strategy to our the continue challenging customers. on traction excellence by Avantor, capabilities our model, the was to XX. slide Thanks, have our markets the I business

far. thus to encouraged integrate the we XXXX closed acquisitions three the in continue progress We by are and

immense to capital is and and supplier customers, potential we partners, are And cash to our of M&A robust. our associates, goodness platform. serve, position and investors through free science to additional our the communities lenders, consider deployment us opportunities our we advancing rapid Avantor recognize pipeline sustainability committed and responsibility flow strong for Our deleveraging

well-positioned ahead, enabling are another our look is deliver your The the helping been breakthroughs scientist in role Avantor remain to customers and of evolving more has will longer portion never advancing focused question-and-answer We in meeting the XXXX. begin we committed And services science. needs the we step ongoing to we the call. As I over scientific want and to our support. in to thank your are and relentlessly outstanding of on I our products of year XXXX and and of life our for interest way. important every you achieving it to term for financial objectives. Operator changing now turn Avantor

Operator

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

now is line open. Your

Unidentified Analyst

morning. on Thanks questions. Good Rachel for is taking Tycho. the This [ph] for

give COVID walk therapies basis And year? so, first points the you you your off, testing expecting the expectations headwind us can into I are for the previously given of but dynamics, you things, then and you us through what vaccine just heading an of XXXX? know expecting update can were XXX also, just for just testing side on the and

Tom Szlosek

I for a has aggregate. bit was half it But we came and COVID-related had of take course the kind the Yeah. million Yuan the says probably look in line and hello. we between so of we XXXX, above -- tailwinds. But the fourth work Laurie came over the anyway, way, Thanks, that. expected Rachel. Tom. quarter, PP&E. at the the roughly Rachel. it is was $XXX in mix what by and little varied with you or [ph] And It split much with vac This used will It pretty of in expected I -- When where rest, to testing year.

X% XXXX, roughly from COVID. said, For headwind we have have got as we

and the in testing have should half for somewhere terms mix well, the relative So full about and for content the It to to vaccination shift, -- be continues And -- vaccination COVID XXXX. a XXXX as in half be in expecting million we in $XXX revenue. year, and million around I of said, are will $XXX -- the between higher year. the between it

Unidentified Analyst

Thank Great. to hi make And yes, you. say sure I Laurie. will to

M&A RIM and we is lighter contributed just next which about the performance about million So, than Ritter you XQ, could in modeling. talk $XX during Masterflex, Bio quarter? were little a up, And

there well is mentioned you And So, is anything all going look for to immigration then, three. into there?

just integration So, us give color you can on progress? additional early some

Michael Stubblefield

happy Thank you, This is take am that Rachel. I to Michael. question.

the remarks, acquisitions the I continue prepared in making in quarter, essentially As my we line came be our think, all progress indicated integrating are they we really about with I to in on excited three expectations. in

the in our in bioproduction We them early reflects got strong gate of their line contribution book and The months days portfolio, own expectations. We we the are performance to Masterflex. great look two the with with to out in order having off of a combined quarter our order great start similar obviously a there. in are

PCR tips, we production the on increase of for or new example, IBD one is only that some also for in would in as acquisitions, example. two have into some again, for starting say, scope we European some starting are on the early bag that we we our obviously business, now there are only also synergies are plates, to to number of our but provide, the business pipeline that we to of and certification that and that work the introducing mentioned Bio regulatory of not case some I with more we we anticipated product there, business quality RIM great really expanding to progress are the Europe, capabilities in our for in a driving. embed well to the of categories, launch that got in Ritter, not specification other we now example. leverage, modest example. and as making technology the able But acquisition were good do product in the we And progress technology to And realize earn capabilities in the we of that But, are great things are planning that other line, we particularly the On size. under sterile commercial product the moving

line of progress, to that investments sight to we to number continue for that platform extremely So which of clear making about. we a the of remain excited are a we pretty XXXX capabilities have

Unidentified Analyst

last Great. then And one for me.

X.X the net So times. you of quarter leverage exited at

I are you to think hit X.X roughly post-Masterflex. targeting

that So faster just we a than bit was expected.

have the to leverage reach that to range end you the X X heard we are times XXXX. So times by targeting of

markets is bring possibility And should one to on we talk you am right we then, about just And about with how you how M&A, that pipeline are then seeing at management on how can a sure that there given off, just about thinking in are now, forward? about that think a your the you higher can the that teams follow-up capacity range? pipeline, first to I just sell given, So, valuations talk prefer progressing? would M&A? So,

Tom Szlosek

date, the the half Thanks. having the convertible. Sure. came much were on -- barrowings. deployed we a with that that of billion billion talk of mandatory at worth and expectations probably times, no connect going forward beginning end XXXX, we for expectation year, more was in I it, close leverage to said, the we have longer about the as as line initially pretty year our that’s thing was of the plan strong got acquisition pretty of Michael Yeah. $X And leverage free on Yeah. we flow capital funded $X seen, that in, in the range only where the second so cash of us be available. nice or at have paying despite in X.X dividend flow as will that’s came can would of we probably, by the at should the times The The really is, X.X that. The our free but it cash thought going that is when you probably

that’s delevering probably another available $XX million $XX cash for million of So or well. as

And targeted if we at times our take leverage somewhere Michael or you range to expected into touch EBITDA M&A. the wants anticipate does the and look of that to levels, expect our second times the question. year. utilization deployment X debt in X So of the middle end towards the be you on to not know part any and That I account by of

Michael Stubblefield

Yeah.

from markets been higher of as capital You we and a into expectations level mentioned get in Clearly, valuations there’s XXXX. the sellers. volatility

I to bit It’s anticipated, this one another see the might think time is only probably these of terms season and my a settle before meaningfully few been to perspective early expectations things bit would probably together stage. coming here. you at change or out weeks see way a meaning buyer level in at a more seller I expectations

So early we to call on than space? question, M&A how the changing the probably in bit for Thanks Rachel. evaluations see

Operator

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

is line Your open. now

Derik de Bruin

-- headwinds issues issues there want of questions that you broad just Thank some I or of any disruptions? Hey. seeing? peers to sort you. -- your some network. and just of I some Is are chains a have ask and sort of sort seen any you of what such suppliers, the with obligatory on your supply think wondering what’s given your

Michael Stubblefield

Good Thanks morning, Derik. for question. the

the Labor mentioned, period. a moved the issue. strained. hot slowed have of We certainly couple of an been More I and supply been that chains in the pandemic various then been things since has recently availability spots, beginning availability think, probably, transportation that of course States years, certainly, over has particularly new probably last constraints bit material will, if been for Derik, you United across the due have product have have like around the example, the to and workforce raw COVID, strained and

business probably, constrained have probably, maybe said year. providing I previous of in the we earlier the supplies what in we manufacturing I quarters. on seeing strain in example, And we the they different on and But the certainly, in were our And supply really customers than seen said, seeing. the our think global keep have flexibility impact we call a fourth chain we a are aggregate single-use and components, So, have quarter, I have for some favors spots at Like the what to in aggregate, last the days the in around certainly probably heels than the growth moved these really bit. than global network, bit year throughout in that at think, of more the quarter, footprints we more the current business the been moving. strong have, to any on look optionality our hot

good are lot lot team net-net, overcome of think, around does a to we I now. inefficiencies of pretty here, there So, a the shape but work right in

Derik de Bruin

helping then to follow-up, assuming expectations? to margins How And price are XXXX in pressures press pricing you that? what what are so for Great. just are your and customers? you on in inflationary able one your Are your offset

Michael Stubblefield

Yeah.

I environment. we And as XX by business, XXX of from our So, before, expand his basis margins, meaningfully. labor which impact up margins, in things inflation, inflation cost benefit productivity are should expansion year also think base expand up like, have even be We cost our whether as then, we do product continues sold, though are we points offset onboarding business. doing categories in to cost transportation costs wage, that hold those certainly material just for goods think and a mixed long-term in margin algorithm context, price indicated to to to expect We driving our for significantly, initiatives. sure, that remark, mentioned are seeing pretty this raw points basis across Tom the

fourth the again You saw in that quarter.

the comes We from shaping have no up content content that. differently. that our see XXXX significantly and outgrowing And we proprietary benefit third-party margin corresponding

expansion points requisite then, of an benefit that to will to year, three of more the on base we pricing. come our add Pricing, you growth acquisitions get the you two the last for is XXX to business, and our them, out between so that year. important points XXX will We we the have from basis expansion closed XX and one-third get will mentioned, be enabler here points. about the going of we the of revenue Historically, that than basis this guide the as from basis gate

-- We think good for traction given that, at this some on by probably macro the something looking environment that environment account inflationary I surprised underlying underneath to we -- order and and Xx and the seeing are have are that. we the of probably everybody year

Derik de Bruin

Thank you.

Operator

ISI. Vijay from is of Instructions] Kumar the Evercore Your line [Operator question from next

open. now is line Your

Vijay Kumar

Michael questions. the and Thanks Tom. or talking here. guidance for for maybe Michael morning, One on Good perhaps, you, my Tom

XXX of X% that Just to forward of basis your to headwinds. X% points organic clarify includes

that but is X% points upper that’s underlying revenue your on XXX through revenues? to that’s wider X maybe us that’s than -- if range there’s guidance just earnings your X% and to So number a earnings that, end a your an why ex is point, right, that, that on up basis basis, walk range,

Michael Stubblefield

a There’s -- thanks, Yeah. Vijay.

still committing is is that think our But and to the I right. we covering mentioned to you in math X% X% headwinds, X% XX%, long-term consider when we The those COVID growth I to call -- of impacts earlier. your are model X%. -- the

are In that, terms environment to of a we that the and there’s to assumptions managing the on that aspects of need also including the dimensions number consideration of you share, getting of EBITDA to living the and in the fall per with and earnings supply inflation through give topline. the to, context chain right

ultra be that we we -- just making. commitments those in are of conservative of the to both terms want think I

the years. you two -- three the look at last done have I what in years we think or when

the the as pretty expectations. current been and impacts shared at prudent have And has gone on, the have year quarter both outset. we the We of

over of I the the and an would year, see margin course expect expectation. ongoing you will that, in improvement EPS the So,

Vijay Kumar

points your basis LRP reason follow-up, annualized, what you -- expectations Understood. M&A Tom, Can XXX of points I base once expansion. that contribution. these is And asked can the for to versus because annual expansion then deals year, implies one expansion XXX XX%... talk basis margin margin your of about the hit The

Tom Szlosek

Yeah.

Vijay Kumar

targets. fiscal …

Tom Szlosek

Yeah.

Vijay Kumar

the what’s visibility expansion? in triple-digit So margin the

Tom Szlosek

question. remind you, points the certainly, impact margin M&A expansion. from to the we basis roughly And XX XXXX, just had That’s on in Yeah. Yeah. great

in having when its you intended it’s fourth look the quarter in was and effect of strong in particular the rate. margin impact on the So really terms

in would points points, that do deliver basis that is, made with business, M&A. go forward for there. difference well that XX we will consider floor on and And this think and the as execute a XXX normal I So, you to up I the be points in XXX by -- to basis of factor XX higher the that, basis than the composition And call we XXX think then organic probably I to roughly consider points that a probably, basis our and consider floor. planning we

and forward, a well -- proprietary we it expansion. As and content higher more go our of has our margin proportion the bodes becomes business has for that margins scale to and

we and in investments whether feel as expect that with So biomaterials, confident marginal we we of with of the as the business that production, we are in and technologies proprietary applied in mentioned. the areas, very biopharma get the M&A, long-term expansion both advanced it’s capacity integrating into and some in of the that projection growth some we the parts materials, of making

Vijay Kumar

That’s Thank guys. Tom. helpful, you,

Operator

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

now is line open. Your

Dan Brennan

Guys, quarter. good Congrats morning. on the

question first to So, on I bioproduction. wanted is ask,

fourth like like am basis. that implies can it base in the $XX could quarter base bioproduction and on sub-segment? the what I to quarter, north from then, you tell business, have and you that’s going you math And the business technology how of the million assuming U.S., just my grown that, comment trend, in growth overseas QX? to how the million was I fourth you single-use rate like your XX%. like revenue impact comment So, the order related in $XX to wondering us gave just did the mentioned on annual in know in of I expansion that Could think, order trend the

Michael Stubblefield

growing the to the Dan. quite It’s of as content, those important portfolio Great. comprised Bioproduction and proprietary obviously, of margin fastest [Technical our an expansion of business well. the Difficulty] start model. Great contribution questions set to is with, solution our to it is so majority carries important, part

in about put overall. total Biopharma all we more talking production perhaps, revenue on to, the in as know, are little you of our above you revenue is our than it and about aggregate context, have books, a of bit that, if Masterflex XX% XX% Just being Biopharma

in that with continuing that it’s line well In more quarter, kind is level comprised of very high business. growth a XX% and of expectations. strong the as than platform, in vaccines really you and another to we the in performance delivered growing suggest importance So to run at

is there the the that’s key continues that an have had our order important be of bioproduction and We growth to think too. platform. But to driver pretty it recognize been we core robust do I visibility business great had book in

Our order growth also reflects that.

a books bioproduction approximately would of being year’s of also that composition worth similarly to XX% now We forecast impressive. our core for reflect, and book business. the a are the as sitting see chance orders we of get with probably, And is order on that the order Masterflex

seen more modalities I strong getting the to and historically recently what our continues long-term. be have plus antibody continue some and an and exciting growth or the in cell have So some opportunity. business of the mid-teens to business use traction monoclonal therapy, the that gene in long-term indicated we of part recent should of the And over think, comments, I as core grow

than way more single We bioproduction, years, are probably of on more doing last well growing the Within that leading a recently. than use has basis. better over XX% the been couple core

virtually significantly have We our facilities. of invested with every expansions at one

been have pretty about that. transparent We

on last the of I that part footprint think growth we we more see in our fuel the to -- year business. capacity part doubled of our than that

positioned. well very are we So,

as strong performed as drive We will in core well the single-use. great again expansions and process shape is capacity, excipients quite But in continue our here. business ingredients to

Dan Brennan

then, mean, kind you related answered as And of Thanks, be it. I Michael. a which Great. follow-up, may

context consumables the of in Is know within talked I the the So think Thanks. you growth guys guidance? margin. it’s business, calculating we and materials looking growing about zip at quarter. proprietary double how know XX%. segment code We do were a really right I XXXX gross in in north important that your digits of for like driver that of about

Tom Szlosek

Yeah.

digits, into a our mentioned be RV in and go and materials grown And year of rate products to space of the to that proprietary certainly lab There’s number production yields the content the a tend expansion. margin including into with double times which XXX from we proprietary of points kind in specifically that around, and historical things business and mix. algorithm expansion to earlier, area, content. our are XX the to so And As probably we benefiting X consumables, space the the historically, to the quarter on our a of to basis true our X base consumables more content, the times exposure times I the of which We oriented proprietary differential basis times, X have our materials that outperformed at third-party certainly, held expanded third-party. even quarter. proprietary X lab points

in was and aggregate. expansion mix certainly the margin quarter important So strong

Dan Brennan

Great. Thank you.

Operator

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

is now line Your open.

Jack Meehan

the possible million you breakdown good year? Thank on XXXX? of back of last and a Is to just Masterflex, I in you to deals in then sales did between $XX morning. get three it is that for $XXX on M&A track go the wanted to quarter. still million And the

Michael Stubblefield

opportunity of I to Jack, think, still had more that are did part you we to and $XXX visibility when very Yeah. that that at the question the confident, hands confident million have our the we at the order with look time the perform around we to to continue in deal, days now your that probably, second it there the to own have provided your improving business we innovation business, in XX is pipeline going that or our in single-use think, least been have at and seeing for visibility I given how line, single-use and perform book, Great so. now we great that in business business. will growth focus the

much So, the when to expectations. in got that very expectations, it line our but I XQ am say, nice expectations, backwards we line specifically, more much, deal two growth. much the our that, our some confident other modest in as we deals a saw in from Ritter, in XQ kind that business, sequential certainly the line certainly, business outlook than for in obviously, two-month that with step into with came in have the and in with came then the at I would Bio, and RIM that other of contribution up translate quarter. contributing two, you smaller And we

Jack Meehan

great of to to growth on be more to off guess, I latest you just it. And Got order call your COVID time hand get bioprocessing, And book one thoughts related confidence would specifically, just and revenue it just the out then, non-COVID on the in the quarter? kind vaccines. that? the trends Could over to how in the compared

Michael Stubblefield

year, chain. of those contribution a go from at the year’s them, given lead look that of into given for that approximately million half the COVID some many roughly vaccines, came the of And of of in those are had times some the COVID highlighted we approaching you that them, time supply just but constraints not of tailwinds that in products all lead $XXX If the to vaccines. the

from sight this this look when So getting ahead we and we year, year that I the contributions are and similar from and XXXX have vaccines. obviously to we look to of last think, expecting it, contribution as as pretty in anticipate line at we vaccines are we clear compared year the

Tom Szlosek

of it’s book question nearly I’d -- on order continued comparison say of significantly more order the as grow biopharma before. mentioned The the -- we doubled your just sales year. the on has book. since the to the the Yeah. it’s production, beginning I on mean, to

those orders than the proportion open As of XX% it. to Michael to related mentioned, of continues less be so or COVID

pretty have the dynamics. Jack, I well you those shift referenced, through in out the think, that migration So stands

Jack Meehan

guys. you, Thank

Operator

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

line now is open. Your

Tejas Savant

hasn’t season from sort sort and policy, Hey, morning at a there or about COVID of the as I natural vaccine And might talk then the of a from some that all And relax the if any for of you disruption and how long level and you to thanks that when, impacts mRNA surge that on low a you to policy? well sort here. such? mean, asset want guys. I are issues of this talk Michael, zero view a time China bit decides your the concerned China. are and case as Good seeing immunity worked, Can be plays just customer tolerance little given modalities?

Michael Stubblefield

Good questions. Thanks Yeah. morning. the for

probably of our for context did region be in of revenue, China it’s China subset to important put think X% that. a over The entire first obviously, has would our just business. I and

business Masterflex but that acquisition and relatively some the -- -- continue brings off will us the to growth gives for on our we only that us of So, a base, that working giving impressive the And for we that given the small of pretty are that numbers that region business. footprint customers. generate the small in solutions accelerate capabilities help

pretty and we I there we think our outlook So, positioning a for excited that. about have optimistic certainly are

terms the In are exports obviously I a U.S. regions. than customers, physically. for of know our are our and with interacting from the other than that China is how least we of Other just send able we different us don’t lot region any not Europe to at into

reviews So, innovation we from working of do the technologies. are pandemic. our contribution we that a pretty there. work our pipeline was around had there some And are as up teams an But it prior doing on of center the conferencing of that we impressive onset coming worked with on, certainly of the that utilization video and kind to facility the they the program, just the opened timely that

efforts we in well their therapies So that to China, bring as customers and ways continue our continue the of and despite progress engage to interact to ways the with as the pipelines, world, our to teams in our some clinical market. meaningful face will to find around support restrictions and

Tejas Savant

decline is terms COVID-related the your NIH funding sort there to in assumption etcetera, in quick being single-digit in That’s to in as Tom, Education and sort you pretty a the get follow-up to XXXX. but growth and what on you Obviously, expecting you into as baking curious that? mentioned, of robust. that there well, think, it. have And I take of was helpful. as factor Got of on are PPE low Government, that testing I outlook, just curious

Tom Szlosek

are seen but environment consider is improvement. we be all funded. The can -- Thanks, perspective. an of way Education was NIH environment -- definitely have we and Yeah. looked from strong the improving it some offshoots potential we to Tejas. and they pretty -- promising again in the back, no The gradual I get don’t us new for Government think also yeah, if these doubt ever

mid kind entirety. are its is single-digit at it group roughly the in XXXX in We looking of growth in

Tejas Savant

Very you. Helpful. Thank

Operator

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

is Your line now open.

Patrick Donnelly

Hey. visibility within book and about of just and to pretty where tech one pockets again, you a bioproduction. talk be are put and visibility, tend the taking there, little that shorter growth We the underlying market just cycle yearlong up Good seeing talked talk maybe advanced Thanks or questions. for a of the know into can strong I be segment, confidence results, guys. helpful? in just the into strength order of continues outlook your Maybe XXXX will XXXX, areas to about the that morning, material about you

Michael Stubblefield

but fragmented Patrick. science life for addressed Yeah. testing, of our on different a number certainly of we that of Thanks the a defense, as works application across is part for business the areas, lot question, -- and highly end Obviously, it’s as environments particularly same providing workflows things production QA/QC that around we and content work, proprietary example. around formulations and our and businesses have in to like semiconductors, well aerospace markets

the pretty suggest, you As to year. strong finish

reflecting think that’s demand there. noted, markets supporting strong that well strong the think around production meaningful. pretty And example, that I end I pretty pretty is with driving frockiness some the backdrop the are indices world, PMI for in semiconductors, like we of

of not business, QA/QC say, ship type It’s testing the lot looks of macro rest support. a of like say, business, strong all, work if of to that output side that is we kind of our areas the which application is, revenues. most, lot I’d the least the So, and across at book pretty pretty Visibility supporting a that strong backdrop. on is

those for We platforms pretty in I feels to -- semi, lead perspective, I digits a we are on when But overall. mid-single longer have think, a production it at from a weeks. platform But the much view few think example, or continuing bullish right in outlook talking year-over-year for Certainly terms. the trends. look the in the would days a in mid something the into we support

Patrick Donnelly

just a on want what EBITDA it And EBITDA which housekeeping what and a clarify through you bit, I that Can for the one to down. adjustments you helpful. looks talk the was like then just jumped That’s Okay. of there? side, saw kind Tom, corporate just from little spends just pushed

Tom Szlosek

our actually and is at an at corporate. in Actually in one or little trends look not I don’t for we the the spend that have think or unusual -- there’s bit we one-offs well-managed in view when think expectations. salaries it came a inflation have Yeah. you also the I quarter, overall indirect when and It’s aggregate, better I anything environment in than got when both on it’s would to some year the but it -- any in expense there. we mean, or anything well. easy as a for of look comes good -- think next our on I

Patrick Donnelly

guys. Thanks, Okay.

Operator

Your next the line Goldman question Matt is Sachs. from of Sykes from

now is line Your open.

Matt Sykes

Maybe the that been the have the just line my and question, you just growth first are Great. question to supply/demand on the asked, picture bioproduction given seeing.

this beginning and what Just have been year or are part seeing, going wondering demand some steady of throughout you last of stocking in customer the terms the behavior, on is there is year? additional pretty

Michael Stubblefield

Thanks continues relatively question. of Demand very obviously, the tight strong. Supply up for keep to, to be be chains demands. to all very, with continued the

And for life shelf really a it’s we there’s unique support inventory. system are providing. materials not in to So that and capacity excess that, buying the a little incremental storage bit lot or there’s in considerations sensitive considerations the of regulated

as have strong So the demand year. patterns move through we times lead have extended materials and for been been our

or can And so, relatively be of timeline, kind something that easily. accommodated incremental a transitory tight isn’t, buying it’s within really

levels are line think, pretty we the servicing our in that I is customers. well So, of production demand with

Matt Sykes

EMEA, that. for mentioned to just you China, Thanks want before increase on Great. there. And have more exposure then just one you obviously,

mentioned exposure an some made have RIM that also gives You Bio. Masterflex But acquisition, you there. you

local building or look China? are sort pipeline, it is inorganically, building that more be How exposure inorganically? there that you with exposure at about of looking in of can multinational get think thinking exposure As terms your kind of build do you through your larger a company enough you exposure, of a out would company at exposure you to you

Michael Stubblefield

we offering up work to that provide, you coming for customers. build this we markets, to the a take to talk need at our workflow-driven When to our look approach strategy. and we looking what to Yeah. serving compelling at to go then we content approach, solutions and way serve and a these about Thanks

like at monoclonal are an take when moving we pretty in at, therapy some participate of workflows particularly, tech in, looking so, on area cell well example, in are you that look to bioproduction, core we we look for And and place are positioned. the transfers and a and China, the gene antibody, hold example, they that for as aggressively

time, the think dictates our localize they And been have so, been or I in up have to been where by the as the bit and our a Europe over chains now, more supply sites always in it to importing customers the production able market we strategy requirements until to Americas. agile. and make with product derisk has levels China, for satisfy for help shorten supply capabilities demand the from And

and kind certainly, so, that capacity add And whether we the organically, -- RIM it’s will in to in for line or opportunities additional gives region. with of continue demand in inorganically the look direction ramp-up in region Bio to to, of footprint the continue an us

lot A capabilities don’t combination. of these a be exist locally. will it So

things strategy investments built that to execute would you interested. have our cognizant we certainly that if be be some these things by might -- to -- we our can So, bring are us own find built organically. of will also But allow

mix. be So it a will

Matt Sykes

Great. Thank you.

Operator

from Your next line Fargo. Dan Wells is of from question the Leonard

now is line open. Your

Dan Leonard

quick Thank follow-up A medical morning. silicone. a bioproduction you then on and and clarification good on grade

Thank silicone, on there, am called outlook just you. that that or now in backlog, includes grade the your mentioned if going And growth is what’s that curious how is medical you the and on wondering, So business the Masterflex out I you big growth bioproduction, inorganic number? forward? growth then XX%

Michael Stubblefield

will I order you. in take for -- The reverse

excited that part a If of you an incredibly is tremendous look of amount area at platform, we is are business. that our innovation about. that biomaterials in our There’s which

the deep that part significant. business. for revenue both there into continue when and weak XXXX, The contribution outlook strong year have and of COVID-related strongly well comparison opportunities our business We from again the well in segment. as at customers margin double we from from But business digits, of the some on that gets impact Healthcare growth of of rebounding pipeline, very our relatively rich was with reported a progress nice on in as given restrictions. our our our platform the -- full for very got is that contribution the that And pipeline it basis, year a to a I look

talked XX% from Roughly, overall provide that testing for would platform. about have we our As half -- of about diagnostic come biomaterials half before, roughly that, platform that’s XX% our the our we would and solutions of that revenue. of other fluid be

organic growth here, think I with basis. of organic book order to Your the what the have as indeed recorded have Tom be XX-month -- we as But would other book second -- just Masterflex the reflect of story we throughout the our question the year the you part order milestone. they add order order shared been on the now, numbers significant. as we as around book, But will anchoring books organic -- into just of become is start of in here those numbers they for our

Dan Leonard

Michael. Thanks,

Operator

This Stubblefield Michael I Mr. concludes it will for closing question-and-answer hand our session. remarks. to back

Michael Stubblefield

you, and certainly, Thank in today. for Yeah. all thank you participating call the

confidence to into my I we think like XXXX. I end here by where in at would reiterating here just are heading

and another flows. cash are growth, expansions margin to year deliver extremely strong We very strong with well-positioned

momentum. Our started a with end we and the markets year are strong significant

our So meet in every science day jumping gratitude Also, motion am and our express to updating I look and setting forward are am off be around efforts quite the great of Until associates the to then excited about be want for the living we and world. values my a about everyone. Avantor who continued create ongoing what for It’s year. world to take to safe lies care point. better ahead you another going I I next. when excited

Operator

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

You may now disconnect.

Avantor (AVTR) 4 Feb 222021 Q4 Earnings call transcript