AVTR - Earnings call transcript Q1 2022

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Operator

Good morning. My name is Katie, and I will be your conference operator today. At this time, I would like to welcome everyone to Avantor's First Quarter 2022 Earnings Results Conference Call. [Operator Instructions] I'd now like to hand the call over to Tommy Thomas, Vice President of 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 our 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

Slide and you us Tommy, joining today. I'm Thanks, morning, X. starting on everyone. good appreciate I

quarter. quarter year we our in hopefully last have release results, with night started first seen you we As the issued another outstanding press with the

quarter, our service growth of markets. basis our driven expanded macro we continued metrics, of sciences growth first our generation, We margins core life inflationary free in and In cash business and EBITDA dynamic growth, of expansion, our applied and end organic attractive track across revenue intensifying our offerings, strong margin adjusted highlight the across impact environment in revenue the resiliency well income Our as the despite increased by and XXX our including model a record net position acquisitions markets, of business approximately XX% execution. product million XXXX momentum by all in free end financial in We expansion favorable achieved compelling approximately flow continued core X.X% results key generated our cash premium earnings flow. pressures. points, including approximately platform and as by $XXX our

growth We also made long-term strategy. our significant progress executing in

than to currently invest our to completed infrastructure capacity first which expansion were the of and continue in have growth manufacturing support projects and flight, in We more X in quarter. dozen X

of on delivered additional commercial Our XXXX provide focused We and internal including for offerings use on impurities. and a proprietary breakthroughs remove used products market, RNA including solution viral gene and cell proprietary the production cell the remain helping pleased operating color M&A with several our quarter. therapy plan, are integration targeting DNA margins our and reagent we in strong will realize multiple new We launched and our and of introduced cell core new lysis growth progress the in closed potential Tom synergies. later first acquisitions ahead adeno-associated vector in presentation. scientists the to

syringe vector, offer offering expand We mRNA filters. cGMP custom a also the DNA To LC-MS line new agreement we workflow, our will and us also J.T.Baker a partnership workflows. to launched analytical nucleic of executed in enable acid that analytical plasma viral for

applications. management solution formulated for new including introduced products a Additionally, for formulation proprietary in silicone surgical a applications and we platform, novel situ electronic our in thermal

end our good we markets. have momentum ahead, Looking in

environment. growing, Business to a System Avantor continue drive challenging the and execution Our in we order leverage operating book is to

actively are progress us to to continue delivering guidance enabling and and pipeline. We expansion, our year. another margin working great the raise recent of acquisitions EPS growth with confident will robust year We strong M&A the our remain in integration for our full

and on factors our regarding on many applied with of global Within starting vast by slowdown. serve on the I'm high. platforms, macro X. strength to applied are our of affected impacting Moving mid- like to the majority materials recurring customer continue markets the left Ukraine each I'd end some beverage, space. seeing and Encouragingly, to to growing high touch the Demand also model. accelerated conflict. are of the and and markets activity we serve holding economy. well, including we antibody energy and and the and not and care to concerns unparalleled signs mRNA, resilient, exposure benefit continues Slide highly single we Core revenue the we in to our with in geopolitical are end core regions patterns expand, and our in food strength production hearts of X of growth this monoclonal volatile, both and a our and modalities have advanced cell up business of digits. R&D we Fueled access biopharma those therapy the by continued different situation in any and technology from remains tragic gene workflow quarter-over-quarter. Russia and are emerging chemicals, semiconductors, remains health The

working our items gloves any In million sales million per masks, and donate $X.X Ukraine donated as about $X to we not and and critical collect to food, such which our nearly working Russia, or throughout with We to keeping with in we have Europe blankets clothing have are refugees. associates and have to values, do capital all averaged cash ceased year historically exposure.

to infections and sustained The continues encouraged deaths. and we to evolve, declines are Moving see in to situation severe COVID.

diagnostic testing X% in and offerings, more headwinds of And than core kits offset X% our protective business represent content total COVID-related X% XXXX. of the equipment, including than strength Our the personal less we vaccine to revenue. our will anticipate

expansion headwinds our lockdowns transition of surprisingly, as in to historically impact flexibility of mitigate our the in this supply productivity we well in and further our our the the created Not challenges. business our as of Additionally, first the Industry-wide to vaccines to our phase. quarter chain us to given have is give are manage all Also, leveraging therapeutics margin and had Business organic incremental capacity Avantor facing a the through our high fungibility categories. endemic point on limited inflation offset region. to cycle of COVID-XX onset Shanghai in levels delays, our transportation been materials support virtually System managing from are excellence a proof any complex an and our of the including are our we initiatives. part ability of confident and ongoing bioproduction to cost constraints, supply core raw a relatively ability both the part drive commercial since have exposure business ongoing Nevertheless, supply modest reality of and Consistent execution the pandemic. of DNA, to

In with can addition benefits our to ongoing customers' to expectations. initiatives leveraging meet our the ensure we that footprint, global we associated several have continue to undertaken

capacity our serve and cGMP will region. approved our EMEA are our We nearly manufacturing manufacturing capacity distribution are salts, biopharma our and that recently increasing Singapore capacity global adding double throughout network. site to on additional in in for Phillipsburg investments customers we the We

supply and headcount expanding recruiting accordingly. chain retention and globally increasing activities operations are We

increases strategy need continue and A can enabled we confirm partnerships details We given is to to number expense next continue customers us is network and our we has well situation optimize will macroeconomic rising in XXXX minutes. ensure X supply our maturities future limited debt ways. over environment. the Despite rates, the our a financing broaden that deleveraging. products are Tom original transportation expectation fortify interest their a the point years the few of the of that to we Finally, and against to challenging supplier our scientific our the mention rising in through interest acknowledge you final levels, to rate expectation our estimate, inventory take positioned of work. rate the ongoing

confident guidance. to of execution makes record and to However, our our customers deliver our track our ability of resiliency the model business in financial XXXX our us and serve continue

offsetting X. organic Bio, contributions reported including performance revenue X.X%, Total QX revenue on Masterflex, on biopharma, the Page XX% applied market and XX.X%, basis, efforts to excellence in materials realized was Ritter of approximately basis bioproduction up approximately our resulting high Revenues we our to growth including technologies increased RIM exchange organic core platform. to foreign Moving grew into our a strength XXXX reflecting expansion across where mid- grew and the most single of growth materials increased commercial markets X.X%. digits, from EBITDA within the margin groups. end headwinds. impact by QX more revenue X.X% other healthy growth of from Advanced grew than points and and productivity revenue of Adjusted and in XXX semiconductor inflation. acquisitions, driven customer single offset strong proprietary impact and proprietary digits our notable in the also offerings high quarter XX%

Our million year. from $XXX to We quarter, XXXX adjusted cash achieve results investments growth in about growth. about net the conversion on generated of line remain about to growth. adjusted strong approximately XXX% increased QX track operating with of EBITDA drove the free in cash XX%, free income support flow up for XX% We despite flow our

our to that, financial net at it leverage Xx ended let our Tom adjusted from with With to down December Xx leverage. EBITDA, results in line walk turn Our more you in in to X.Xx adjusted over through and Xx target detail. me

Tom Szlosek

everyone. billion Thank revenue you, We morning, representing $X.XX good and growth I'm X.X% generated starting rate. in Michael, Slide QX, of total reported X. on a

of this accelerating continues you growth. core X.X%. underlying was can organic And Our growth side trend page, the as a this see core on organic multiyear right-hand rate of

with were COVID-related quarter X.X%, the in Our our expectations. line in headwinds

that And due course remain requirements intact given this revenues the by and and will our vaccine changes are headwinds achieved organic strong represent less a Page driven saw the which materials. FX to total and and a be by which XXXX to Michael over the we factors will increased X% In basis Americas, represents And our advanced technologies growth the Europe, care Slide care, for within grew of sales, across X.X%. in government as to X.X%. growth excipients. offerings on formulations single-digit offset organic to within COVID-related X% demand and offerings organic XX% advanced extent revenue achieved in demand in global ingredients, annual technologies growth. a applied from X.X% XX% strength aggregate of across to and support region. COVID advanced more created organic grew PP&E serum. the approximately single-use our bioproduction customers double-digit diagnostic and come XX% strong single-use Advanced excipients, than driven both by growth delivered almost of technologies ingredients demand process our sales health proprietary XX.X% medical to medical-grade in a for From health growth manufacturing. minute. of testing were health digits. COVID-related were dollar that COVID XX% demand. deliberated growth and achieved growth X% acquisitions materials. X quarter our organic bioproduction applied education XXXX. our growth be region growth offerings, biopharma, our our annual end implant bioproduction Revenues experienced revenue in On than growth and global we More which globally. organic XX% annual product growth serum. single-use, of growth applied and across shows high of rebound. as demand digits as ongoing translation The EMEA, quarter our and clearer, single-digit vaccine-related products organic modest and strong U.S. bioproduction proprietary high our including in flat the sales the confident approximately first headwinds first the our annual business, represents sales, stronger growth X. organic are perspective, to largely sales capacity applied approximately mid-single than that of global relatively European become by organic and by of the of of broad global X% was As other organic from continue ingredients, play market revenue process X.X% an groups. and in sales revenues materials by a by group. silicone year core in in and on the Bioproduction mentioned, Within result To which a the X.X% offerings, revenues this core regional mid-single driven for for grew impacted revenue declined with non-COVID semiconductor driven in our tailwind more as quarter, quarter in our vaccine fungibility revenue roughly X% care, core materials, organic platform technologies revenue, driven will offerings biopharma, business headwind of elective by also XX% excipients and product Within procedures all demand representing organic representing continues to range X.X% demand, and by strong booster process than more including all Biopharma, in and first driven our for our sales,

some gene the in biotech sources, enterprises. we for percentage NIH overall our see and including reserves, order therapy regarding multiyear Our orders non-COVID to the a pending early-stage total. clinical continues open trials of cash book levels There noise of fundamentals particularly small funding development across given has XX% customers the strong and and and remain biotech been approvals. underlying now in with These healthy high pipeline bioproduction health on of and approximately of mAbs, bioproduction, We grow comprising sales, space, robust mRNA. a cell funding the strong positive private industry comprise fundamentals outlays

PP&E resins, organic to and customers organic proprietary chain our capacity materials as our our and growth reflecting supply as by and increase demand. biomaterials sales low offerings and of electronic well We demand for significant we as silicone representing in testing strong. stabilize proprietary the diagnostic our activities quarter product revenue undertaking a a mid-single-digit they and sales achieved of and achieved to constraints headwinds normal technologies for single-digit approximately decline in approximately in our chromatography pipeline customer expansions, organic roughly double-digit customers to annual diagnostic third-party our materials first strategic levels. consumables PP&E as as the quarter chain driven to offerings COVID-related in currently materials, our EMEA. customers quarter, and care, Health instrumentation expect to revenue, with near-term well and the offering. driven in an government, organic were limited in ramp base customers and particularly in revenue, positioned funding consumables across declined offset role global growth semiconductor first revenue and offerings COVID-XX-related our continued modestly electronic biopharma for results testing improving meet all diagnostics represents the XX% ingredients, see up the demand In demand, to continue Advanced in approximately year-over-year expect in experienced research levels. solutions semiconductor risks mid-single-digit for partially decline Education which double-digit of product well and to by play to and COVID-related access By by return early segment, driven COVID-related single-use annual growth K-XX the annual Many remain we device offerings moderated group, of as providing strength biotech and down revenue, education And applied growing growth decline single important activity for Sales driven R&D the representing and strong are in process outlook experienced XX% revenue a and as market, platforms. materials are medical-grade first XX% of by PP&E by and XX% government Europe university and growth chemicals serum in digits, third-party groups excipients, our mentioned. global by our broad by previously universities our offset The offerings. supply of for declines as expected. high Avantor growth

excellence share adjusted X offset core factors first proprietary positive a interest our Let favorable me higher And as as offset and double-digit Free into XXXX income key million These as the XXXX inflation to perspective prior our XX.X%, partially consumables, growth earnings regarding first expansion growth, higher $XXX result XXX we capacity increased enabled per and by to cost management higher in in as quarter achieved supply in million increase offer our offset The EBITDA freight XX.X% raw and Business of to compared partially pretax turn $XXX performance investments in in sales System. materials volume an to up capital investments were debt by result acquisitions. our EBITDA and and of cash finance XXXX than points over our Adjusted capital quarter, contributions from flow made of some operating basis the flow additions cash well In tax the including by by operating $X.XX, spending the adjusted and the in by was to approximately quarter first approximately XX% in working a period. Slide higher financial margin net driven in the reflecting acquisitions business, principally metrics. of Avantor expense of expense support our workforce lower and through income of XXXX. increase and mix, driven increased in materials chain. income was course the income. by XXXX was productivity our global commercial adjusted issued growth to growth, was

of Turning we have to Slide XXXX an progress acquisitions. on our XX, update the

are to our billion aseptic businesses You will acquisitions and gene single-use recall profile and Masterflex, proprietary collectively both expanded cell biopharma manufacturer Masterflex bioproduction and highly monoclonal antibodies, in global activities. support rates fluid Collectively, $X.XX platforms, in addressable therapy peristaltic health manufacturing revenue in we In generate generated robotic a $XX billion enhanced end as of tips, lab the north the liquid million and handling by million transfer expect is Avantor specification-driven at $XX QX, for revenue, acquisitions to $X.X across of all expand of margin market the workflows. and of business markets. the around XXXX critical proprietary we critical offerings consumables, that consumables, and have XXXX, care other and pumps core that in conductive and and $XXX Ritter share. of mRNA principally per for nearly technologies a research plates, leader significantly billion our used automation and vaccine and has has deployed M&A earnings XXXX. our These is therapy technology well business. which approximately double of Ritter EBITDA including approximately $X in recurring EBITDA that of global as revenue a for have including the offering leading

and performance, mAbs, grew our we with the In gene the due ahead came as organic cell is the was first EBITDA planned, internal plan. ahead across and terms transition healthy internal modalities. to and line commercial progressing quarter. basis and the excellence. of therapy EBITDA quarter core third and emerging our end in portfolio, comparing contribution Masterflex business of demand Ritter single The favorable bioproduction operating to our other quarter the benefiting mix grew patterns expect process when integration and broader from the first operating of top of XXXX, on line a carve-out platforms digits same business to plan by high ERP our onto of of XXXX in and

high significant intact, fundamental on we remain faced growth anticipated, organic a continue to headwinds the than single has more Ritter drivers originally and digits growing core Although basis. business the COVID expect

a integration is nearly the of complete. As stand-alone Ritter business,

develop offerings leveraging are our the plan, through technology which aftermarket consists the executing into and commercial We to principally of platforms offerings. focused platform driving commercial new existing the now integration our on

and capital and will financial We achieve in we for returns rationale the conviction have these confident acquisitions deployed. ongoing on strategic are attractive the

past we guidance of maintain wanted rate to expected enable more Moving news XX, original you million. the to years. the us the Avantor in give to environment an from future a have on at is taken interest our I both the good and impact recently approximately and in update Slide as will story XXXX expense on This actions rising interest XXXX $XXX in

does schedule of debt this the in $X.X floating not roughly For or billion starters, debt rate roughly if of until appendix That the protection euro-based. XXXX remainder to there. half fixed mature Further, most debt rate $X.X you presentation, is see denominated. will so rate of which look in you the leaves at the billion debt, LIBOR-based, is later, that billion $X U.S. of good our fixed dollar

All of no this rate penalty. debt freely repayable is with floating

Slide As borrowing LIBOR LIBOR-based XX, cost. steepened original you can we on dollar our upward guidance forward January, curve the see on in pressure the since has creating future issued of U.S. left

have X the offset of We to increases anticipated XXXX. levels protection in

then rate X.X%. is First, the floating loans of had of set floor interest indeed XXX is to have our to our All LIBOR-based interest at U.S. dollar no the of increases When the the XX case the rate which floor, plus basis for below was a up points first floor rate spread LIBOR our have points. the most XXX expense. XX basis points basis quarter, impact on

interest we rate fixed-rate rate interest $XXX X-year million floating Second, euro in executed cross-currency lower-cost April, to swap converted that LIBOR-based and interest. a

ample with manage receivable our points, lower-cost debt, facility, we securitization rate down penalty. continue Third, capacity repayment plus LIBOR-based XX no have under floating outstanding LIBOR again, to basis our to accounts

our estimated million XXXX the despite rising result $XXX company actions, a these expense remains interest environment. As of rate

XXXX basis XXXX some maturity Looking the XXXX. opportunities billion debt repayments an of Avantor a accelerated mandatory pay per with strong deployment, and And flow beyond in without floating and on calls $X year, handle debt minimal required repayment to position schedule to cash the XXXX penalty. through free depending cash debt all, north XXXX, for are for rate continue or the down alternative of on we

provide financial enabled ability On our significant to have EBITDA creating XX, Xx by for approximately to leave and guidance. year adjusted each profile debt continue confident our leverage full we us strategic shareholders. year our our and model us flow cash free strong Our Slide value reduce update an in on

sales X% to X% Our is guidance growth not changing. organic

anticipate to offset strong the expected On by our strong business. and EBITDA momentum in our margin by continued for our year. encouraged growth we rates, COVID-related remain full ability expansion margin confident are do adjusted headwinds core in We

prudence dynamic margin macroeconomic However, we given for guidance holding are on the the firm original exercising environment now. and

the $X.XX results $X.XX our guidance per approximately share to strength $X.XX the first we momentum, share, midpoint. earnings are our share adjusted per Given of strong and quarter raising per to at

confident more expect cash full We $X for to and remain flow free achieve year. than fully on also billion the

strong For XX% the second quarter, are toughest with the we against a materials our quick year. up and QX. growth the expansion and we to that I full reminder comp, than prepared performance Michael. and in QX concludes pricing expect growth biopharma XXXX that call year-over-year advanced margin higher and With by the QX now continued headwinds of back said, hand be of including similar to phase-in to technologies applied offset FX remarks. will COVID This my

Michael Stubblefield

started I'm to will our with remain our and that end operating and Slide environment, Despite acquisitions the continued quarter by the initiatives strong going performance markets delivering growth our The dynamic outstanding their now in financial been their by well. productivity on of first the full positioned year and fundamentals traction another Tom. well is expansion. excellence XXXX we integration year enable encouraged plan. achieve commercial margin Thanks, XX. off has operating And quarter. I by

remain ongoing pipeline. deployment the Given additional continued consider of and flexibility building we M&A and a opportunities momentum strong deleveraging, business in the capital our to active have

to will in continue invest growth our We long-term strategy.

excited I'm and especially raw earlier. materials manufacturing chemicals, excipients. add about for cGMP manufacturing capacity learned capacity You Singapore in process to progress expanding our

forward. in designed to innovative to boost the the solutions bring is earlier, mentioned moving capabilities, supply facility I biopharma region chain science As keeping breakthrough and closer customers

turn and making will for will releasing next which you include operator in areas I over As environment question-and-answer are and I I've the before, want a governance and hope report begin the Index. I read With yourself people support. Accounting to sustainability your ongoing to will progress Board thank Sustainability platform. our in we engagement, portion that Avantor see your second innovation it for advancing our and community and of mentioned will we our sustainability mind, integrity. to interest we committed culture, be of for Goodness Standards the call. now the month, for Science to and are in through it you

Operator

Instructions] first We of take our [Operator De from Bruin from America. question Bank Derik

Derik De Bruin

we just what pricing concern a that give you can terms you year, some call little us seeing I some you're full in you mean environment? did was implementation. talk on bit pacing. about the expect There the during perspective quarter So about Can or does your of forward? out compare full how sort increases your what the past this price all? of how customers to pushing realized customers, sort your like like of are it is from year? And the in at the And pushback that suppliers

Michael Stubblefield

expansion. our roughly Derik, come thanks would historically, around about of pricing, keep we've things couple of is as X/X of here question. would for to from our volume This Michael. X/X talked the growth A in mind pricing, growth from come roughly and

we're the for pricing. that growth that our X/X entered our QX, algorithm that at with in of year flipping, look inflationary when will meaning we line And facing, play. we we see from environment results we roughly As into anticipated coming definitely come

orders customers Now out that XXXX this year's that we new 'XX as play carry and our at all year forward the this business move priced with were some that in into well for of said the backlog the way that, out pretty priced our the pricing, way we we the year, through worked earn we is its interactions pricing, contracts at that's from do quarter. having that in obviously, new

plays quarter, the remarks, the basically his of the have to market in having 'XX the our stage we initial second year, to that all implemented out, the in play. in at imagine flexibility in indicated do this back Tom that. and as inflation And may additional said pricing as to but increases is throughout So that that, go certainly need have we future

our that's here. doing supply with flowing facilities. into keep conversations the we're around supply more anything customers security volume our And Given the probably chain are macro to a bit not certainly their unusual environment, the of and leveraging

Derik De Bruin

I the Specifically, on the year was? bit is get we how we that big those each can basis? because -- And breakout last for growth $XXX on COVID rates how about this some deals? -- and businesses or of little some like expectations? year can COVID for of an on your that much mean, thinking ex of more total, in Great. what COVID looks clarity get businesses original versus ex performance in it these what's specifics your -- a the million for you're of doing on your a headwind core Basically, base And

Michael Stubblefield

to this knew achieve worked way XX% we've out our where last not that remain X the We we value we're as out are noise. of of out indicated as coming running just And we're relatively X the internal too it that probably here presentation, year plan. of QX the in or running QX on for own on this Thanks million model as having of biggest being the track schedule a quarter, minus had . little at very We the for the them. plan is and operating as that. about deal full that where in come came to Masterflex, of disclosed calling the in excited the completed Ritter from our business is we plus XX% year. deal out deals production point, obviously has numbers, creating the out. related remarks ahead the well It quickly these of most about obviously X, through had quickly we and and our revenue at the year. the of in was on acquisitions we're impact COVID the our our time to in achieve well line all $XXX the and with one bit

then, which business single digits. growing very expectations is with we here acquired, core much obviously high our in of underlying line the So what

asset a series getting there. the investments are of have We traction that manufacturing we're quite excited the -- about channel that moving we're making great portfolio with traction existing for launches into high-precision we're and as expand about we also in consumables center portfolio, our of our new a our customers. the that end excited excellence on leveraging And the very through the product

from we X we achieve returns contributions capital. deals how all of anticipate would deploy the are that and the we confident these So excited very super and that about we'll

Tom Szlosek

to quarter, Ritter. it just And $XX million in million roughly our for split, Derik, question I to your see for the $XX the XX-Q on you'll roughly add for mean, Masterflex,

is point I time did about thing deal, $X.XX. was Ritter we range. to on in now the other it about at out the $X.XX The the -- the want euro was That's

contributing on in underlying with growth what least core at the a basis, But to, expectations. be is headwinds in organic Michael continues line to that U.S. dollar mentioned. to addition our So

Operator

comes question next Vijay The Evercore. from Kumar from

Vijay Kumar

the all for Thanks print. the details. on Congrats

QX? the about comp you when picture years. is well just to similar Maybe Tom might to and half, Just moving it's upper chain you mentioned expecting QX, should questions, something upside think perhaps guidance do towards XX% at the on declared are supply the some looking macro [Indiscernible] half? on we when as whether here. here, And for back X% did the as QX, there Big head you talk XQ, you one X%, locked you about think parts into be As maybe given to you the like here at look guys still pricing, about the that of or at

Michael Stubblefield

ways A about Thanks to the to Vijay. think support, of X%. the couple for X%

a have guidance we able deliver a to around basis. being high year Firstly, on conviction that full on

well. range and couple by bracketed potential downside vaccine the outlook of likely with is we And guidance year. how X% outlook our on any driven into pleased through here going think for Models guide of that, that, the confidence be quarter deliver year. end our not COVID that of to there the reflection expectation there to likely go about thinking will we're momentum our absorb we're and we in really X% indicated kind on One strength We of we've EPS, You obviously to conviction is is COVID increased a that year this upper noticed in on where have. around the Tom our able core of a also our to margin maybe this note, And being factors. which we expansion despite play about have note ultimately our those his as trending towards as with organic were well but -- growth in headwinds, obviously only that lands positioned called higher coming the than fall accounted range. that where we here the out and do in headwinds able demand in well

continues roughly order an towards we more that extent for And able be is order is we're to business. have business prominently obviously obviously our materialize, the to book line to good core book that the and Firstly, any offset going bioproduction open book business. through potential core our that that demand and redeploying doesn't order -- is XX% business now of that's our we we have stands to our satisfy core and noncancelable, our our expand core time, has over The will than to to. have vaccine of capacity sight more capacity -- additional an shifted And materialize, order headwinds at book. bulging so fungible, for

a delivering to So in not of we're well end positioned ahead and to have high that drive that upper range, here confidence range. continue the certainly if

Vijay Kumar

year-on-year, think And we're timing, issue, this a that of That's something issue? QX helpful of these on of given much be that's a about amount in annualizing think say the XX% The issues, million. again, a cash talk for to $XXX that comp about is M&A I million? had the improvements? for like maybe million about element confidence perhaps free helpful, we've on Tom. you when timing the The just how Tom, to which it's $XXX-ish track a flow nitpicking, cadence $XXX you But there is I'm Michael. contribution clear. about focus has you annualizes $XXX still one here, -- underlying growth cash when free versus Can flow, million, And

Tom Szlosek

Thanks, in $XXX that quarter-to-quarter-to-quarter is math our Vijay. million. on does Yes, we've math, -- that view -- but businesses I the don't incremental with growth on would disagree your the first, both I the support seen say mean, M&A. I your

you look XX-ish QX third million, in to if or put example, That around For going in at million that QX, for was month $XXX million when missing $XXX I think Masterflex. in revenue were you $XXX revenues in, QX. But a our you're so.

sequential us think is performance, our or if And confidence. adding $X is the giving little which you it $XXX On can what incremental but to quarterly say get million more operational. is the really would growth that is modest growth, you the can XX% I a So expectation. I so flow, easily million, bit see to free cash

actually growth quarter that capital had in you'd business. working In helping acquisitions XXXX, XXXX underlying and first terms as the in of dollars. favorable is you see fact, the us if of growth experience well we to the compare the And from addition obviously

for we is which X billion a $X when one for And So the there's the think nothing bonus, you're cash know conversion Remember, flow cetera. QX profits. full than Vijay, our flow nice employee years year cash will except of tax in less point whether started increment onetime et healthy we payouts, typically the fans. I ago. year, various bigger given low fully XXXX. were from or million be of of $XXX our confident free unusual I'm I our free it's

it speaks is to the -- Xx So of model. I performance to be the that, think,

Operator

Brennan next our take Dan question from We Cowen. from

Dan Brennan

if quarter. want be so don't to the just you Maybe on question, the understanding first basically clearly. just mind, pacing, on the it -- Congrats you

saying basically the saw you growth tougher as in QX, rate QX. going comps, similar So despite you're you're to achieve

the X% in core code organic. you basically, X% somewhere So ZIP ex would organic, have of

want stacked about just imply So a understanding ensure the step a I'm messaging pretty pacing QX. that in would basis. I on to decent up

Tom Szlosek

the I the last got -- The remember think organic right, Yes, sorry, we XX%. that were you've -- quarter or total -- was second it Dan. year, first growth

year, But patterns forth trends, particularly X% including rate the mentioned to year. books order I the in couple for confident first teens the toughest X% businesses. growth in We've so times in grew order of a the, growth up Proprietary And so good said, and us proprietary the got that quarter. we've our strong we're as have against comp the quarter. underlying second the for of the for

to that expect continue. We

we We quarter. has about, good also momentum the by talked side. the of have full the Pricing, its end of reached from as point implementation commercial

lift get should a to QX, you side top QX little of on bit sequentially, that the as So well. from

supported. well is it So

far, we're haven't confident And in what the quarter April. we we're closed so -- we But full outlook. seeing, are

Dan Brennan

just updated then the And peers, contribution COVID, is on X% your to I again, to view, while be wanted the business understand, Okay. smaller to than maybe certainly might X%.

side. comes the X%, out on So that all the of vaccine

$XXX this in and $XX assuming revenues vaccine-related in other. were we million year, million test previously, So

any base with at the confidence. help slowdown capacity size and/or I or backlog rate to X% but higher X%, of would be it other with the was business? color in instill on be additional Was the now the therapeutic it share be meet of base the -- XX% XX%. of lower? then the ZIP plus on the million said at you on the code And that's it growth could presumably the the end, further the $XXX to So business, to would part willing first the kind Anything be to would should confidence -- of guess meet the and vaccine of the you in the somewhere lower base something order Was part second remains the level? growth that on just rate of given question. business fungibility testing that your

Tom Szlosek

Yes, let me take that question.

X% the a On X% bit get deterioration need going range, expected year, things on testing to to the probably headwinds the side well. also the of to for of as X% you're to

the quite bracket additional could but that certainly to million I not in the that, sure would I'm the vaccines, get high in of scenarios, is of $XX So that it million of headwinds range. that. worst to on end yes, perhaps $XX

demand. our bit of a of book it said in On sit continues at to the of And today, ahead previous this production, as I as core calls, we've roughly side worth that on even year's trend perhaps order mile full stage. at here

any there additional going that's is lot A to to vaccine to we to on here. booster of here. not. can clearly, that any demand more able on way comes I got that business. But any comes not around our anything of We've supportive demand through to or as that be counting deliver soak book offset support very or the through with views to season be of certainly additional the enough the fall our confident we that needing might core associated need able for than capacity that We're So in that not uncertainty the we've we're order outlook. be got vaccines, an guidance said up before, there

Operator

a Meehan we Next, Nephron Research. from question have Jack from

Jack Meehan

just about specific of cadence wanted margin to quarter. ask the I expansion first relates again it the the to as

the model the now of entering expansion. originally assumed I delivered the the factors out some ultimately of going lower XXX you've bps think was and given to year, in first come laid quarter

the So exited could that came just of just from of and in maybe of the where related March. upside quarter I kind quarter if the how curious to you toward have much articulate the you was might end how been

Tom Szlosek

Yes. Yes. Jack. Thanks,

do talked about on balances think the we pricing around dynamics see look business of as out bit fully inflation. But on is as first the million million first quarter organic original million bit come was our over going XXX contributing and, one. and the we business, And to what basis I pre-acquisition in little probably reiterate, a When $XX We're more margin said was expect the M&A. as the higher anticipated delivered contribution it forward, course we M&A would $XXX than $XX guide core the the to to as that contribution. quarter. we of M&A $XX talk going business million just little million, the and as core organic of was the $XX organic that that expansion timing year, I from expansion a about given So we the forward. that to points of call be it, the in XXX much from we the the the

Jack Meehan

reinvestment Great. products kind percentage comes And seeing remind of what with talk in you semiconductor about demand us you're just and Can there. of today? out the remarks, then what the ground demand on called increased that serve terms of the side you for prepared in what you from potential market area, with just on sales the the

Michael Stubblefield

including cleaning manage continue of strong. proprietary to today's is a clean be number to a materials points that double steps wafer, to produce a pretty with as most technologies of in to the important that high-profile be functionality that space. to Jack, digits and Clearly, of And supplies that. into a in around materials applied and of reported in end pretty the well to our from here probably world, advanced make help a are that, produce been environment, There's set we're of on We're exposure or very growing is some that function positioned steps States, an in of that that space we basis a a proprietary themselves Clearly, is steps. very, process going that you're we couple the in technology, process of in used formulations for their semiconductor a technologies which have to wafer, supply we're space a that of in though, United So importantly, supply space. happen, demand our in solution lot and we to into of we a X X benefit a more semiconductors a well announcements XX% collectively around talking range, positioned revenues. supplier the that including expansions of our provide the to to space, our and used are couple -- Within Perhaps thousand that than continue lot points. etching and a overall momentum, which semi percentage number gets comprehensive actual are wafers required room most supplied. that services of proprietary the of manufacturing the market,

Operator

question Morgan next Tejas from Savant comes from Stanley. The

Tejas Savant

it. you just kick I'm things headwind? FX one remarks prepared mentioned maybe your for off. I Tom, the quick missed exactly is What you sure a housekeeping in to maybe or not it

Tom Szlosek

so line. in of or be million, is was X it, hundred at so the of million we as for $XXX when I'd the expect that points. now you say. Yes, full And it couple quarter, or look a million -- on to percentage And top for the year, $XX you call roughly the range what

Tejas Savant

one go yes, Makes it. And then Michael, sense. on. Got --

Tom Szlosek

I closer in somewhere to the so $XX X%, about. should I'm is range, The but have it that million it's X.X%, said talking

Tejas Savant

Got it. That's the helpful. geos. on one for And you Michael,

contemplating deadlines on some of small and in Russian is back payment what obviously, of terms importantly, and of proprietary when significant which things the And region natural that guide do to turn are recession-proof mix expect there? you relatively exactly Europe, China of the dependence off And here. So you be Any half in on there in the scenario? a here, the of gas threatening normalize these more and even essentially Russia the under then year? energy on backdrop approaching your is macro you you, for given thoughts for consumables product supplies sort to your in light

Michael Stubblefield

Yes, a couple of things.

on read is your correct. China, Firstly,

have the it's centered meaningful limited as exposure did the as disproportionately here we although on how up come very we to they said Europe. We the as insight improve date, we our But real thinking no might and there, move beginning obviously the exposure a in invest. long-term no on it's or evolve Europe, we've to Obviously, there, remain testing important In from with. of recognize forward. sit bullish here today, impact situation might dealing that, are quarters they're pandemic, there out was to about strong and outlook when limited -- we where No as continue to to business. pretty tough that impacts clearly, things we

down, And Europe comes going in the stronger regions. be are so other bit a as than naturally, the to headwinds testing in

of we north business points So basis, couple Europe X%. at growth basis core a of grew that of XXX organic on a in

the look in have facilities lot that that the we've footprint And markets, to chain We'll there. certainly, are global things situation unfold, in important we got look the in And gives some our of facilities served to customers throughout areas. our first performance large in normally. with to pretty at momentum to including Poland, at all run the continues end strong kind each strength really that the quarter. that have in for we situation as our some the we're been confident But today, we confident the including us of the solace ability we're as pandemic, watch and supply do it's region throughout assets really continue everything We continue our dynamic. to do Europe industrial do of that So quarter across a leveraging this optionality. keep the to able a our exiting we've take in and to of optionality,

Operator

next our take Matt from We from Sykes Sachs. question Goldman

Matt Sykes

that of you the did. this on valuations been Just and doubling you leverage see still risk your plus M&A is this that mitigated floating a has for pipeline, is that's ratio interest rate my still first to are M&A think that in year now, paying for M&A debt compressed just the But the interest about kind one months? Or It's there everything on rate where down mitigation side? and good that year. given just as risk term terms the sort rate rate priority floating the longer on you of in of down X the is

Michael Stubblefield

continuing When allocation to you've M&A hit of I and think X I think about deleveraging. elements be focused priorities, on our here capital the

discipline to us get continue that clear we a pretty clearly, a great not, going have date, we algorithm think strong thrilled We've, I continuing done and through there's forward. discipline showed be take I would business. the pipeline have and if be expect be deal can year. by what on think, a deleverage value We a would do created this comes for we to if to similar it execute, the do to that, to something able right should to But you lot that of deal.

Matt Sykes

headwinds. called to alleviate just time? contributing number market is you we over would government segment, And the Great. end call and in out then that else on of decline? you Or mostly it of COVID a out mid-single-digit COVID expect that Anything that education in and to that terms

Michael Stubblefield

Exactly.

the government-sponsored of X support, on regions, You the whether around number right. PPE time. COVID testing relief that Particularly side, government it efforts participated diminish be we all a in or really over where that world, got in it

of more So should expect vacation to growth our piece, out that normalized space, we levels. you work the that, as way to particularly return

Operator

Patrick Donnelly We from take from question Citi. our next

Patrick Donnelly

the Just another one on deal side.

to sense about they're for just COVID I that over to remain the just of how side. underlying product exposure given Just there? thinking from is into we versus And the COVID number sounds get trying to to quarters. see orders. of revenue comes but bioprocessing wanted the Masterflex, using single-digit Ritter, I transparent past want talk think for just I For fully customers, visibility similarly, anything few on going mean it's as confidence should out a the that it kind on not? the again, kind the like, you're It fungible through I same that is assume well. there, high

Michael Stubblefield

Patrick. me Let take those,

several markets engaged And Ritter research as on hundred direct we diagnostic given world for customer, how get our base our case, obviously, translate business locations sight benefit the product the is meaning the are and base model. the product have, of model the business these aided being workflow this actually at across acquisition time these primarily is business were customer that that that life The where actually being the of we technologies science pretty testing, able is used. now some the thousand at time can the and had limited basis. now that now, the in line specified And bit, this technologies have we of in same was we fact, into an -- the customer by side, a proprietary that acquisition. OEM-driven good we we the customer around was On that the to relatively businesses in reach to other a end in that customers' follows do

that. So the we're to being do able translation about certainly in excited

to your question? You second had a part

Patrick Donnelly

Yes.

the Just exposure it COVID terms of think the with there. Is in fungible bioprocessing? talking of to on to other you're how kind what Flex similar about Master or about

Michael Stubblefield

think relates think what we bit about how I but bioproduction very it in order it's business, book, the our is clearly exposure strong a very, have it in similar very, same of bioproduction own COVID about Yes, a very legacy mix our we supporting line. the to exactly we there similar vaccines and is some of business. There think as

Operator

Capital a Next, from we KeyBanc Knight question Markets. Paul have from

Paul Knight

get programs cell monoclonal traditional kind I what That's as talk you're accelerating Is back On of the you growth, the up taking broad off are seeing to bioprocess they product So and could gene about order vaccine on book, of demand? -- dynamics is this companies are in of and the obviously and question? other it guess, you're COVID. spite seeing programs?

Michael Stubblefield

as the -- exposure broad agnostic to that It we've across The demand level. those pandemic products and pandemic, core pretty a supporting, the business to which we're indicated to we're therapeutic all. agnostic has continues for area, waned going the Yes. modality, underlying throughout grow throughout to we're we're aggressive at have not

material and as demand the balance well has therapeutic vaccines as So the been there. base. other as both capacity demand we raw We've had supporting broad some constraints through

it's and very strong. been demand the been So has very, there

to continued chain business. has core vaccine, incremental available pandemic value allows book of order have the us as for the business. the to some is made a away lean orders towards Our core that just the material and capacity from on we build and that with raw transition as availability we pull throughout And the the satisfy through forward books our

Paul Knight

therapy for able market? And the if in and see the mRNA hope pickup are you happening then in is cell lastly, to

Michael Stubblefield

and of some COVID should mentioned wouldn't X near-term there. growth be the that probably to continued therapeutic able we Cell the exciting share our gain mRNA platforms, put to of by growth has front-run pretty products biologics help market a But we've bit participate be come. in tailwind As partnerships therapy I core ahead end to drives beyond area. years driven great build opportunity. we've That the in exciting momentum, as space my in to the the launched the be of as lion's the commercialized specifically has we well workflow. it's the modalities targeting us couple continue place prepared think that next that expand obviously you be into experienced as gene do and and continued traction. And Certainly, that are offering helpful remarks, for anticipate you the and service and monoclonals. in positioned And market as well which still to is the there, driver. vaccine going demand we gene a starting market platform. a heard That's be years, in us and cell of pipeline, And a therapy going the be revenue accelerated certainly still some to lion's the largely what our of growth will the the to for customers. for of the to and and the antibody bullish over importance to share discount monoclonal that's all we is is pretty going dramatically. both opportunities development going COVID And

Operator

concludes now closing Michael to remarks. for back any hand I'll so session, our it This Q&A

Michael Stubblefield

Yes. our Thank today. call in for all participating you

motion values our ahead then, gratitude about Until for safe, updating setting what lies when for you As excitement my of we I living in meet everyone. we efforts Hopefully, to take care to a remiss confidence the around and and you science sense are forward ongoing better all if be next. close, would of Avantor, world. express day we every and continued our and create certainly our be the who associates look didn't world I

Operator

call. you Thank all This call. disconnect your Please the for joining now lines. today's concludes

Avantor (AVTR) 29 Apr 222022 Q1 Earnings call transcript