Avantor, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the Avantour Fourth Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Helen O'Donnell, Investor Relations Contact for Avantor. Ms. O'Donnell, you may begin the conference.

Thank you, Operator, and good morning, everyone. Thank you for joining us on today's call. Our speakers today are Michael Stubblefield, President and Chief Executive Officer, and Tom Slozek, Executive Vice President and Chief Financial Officer. The press release and a presentation accompanying this call are available on our investor website at ir.avantoursciences.com. A replay of this webcast will also be available on our website following this call. Following our prepared remarks, we will open up the line for questions. I would like to note that we will be making some forward-looking statements within the meaning of the federal securities laws, including statements regarding events or developments that we believe or anticipate may occur in the future. These forward-looking statements are subject to a number of risks and uncertainties, including those set forth in our SEC filings. Actual results might differ materially from any forward-looking statements that we make today. These forward-looking statements speak only as of the date that they are made, and we do not assume any obligation to update these forward-looking statements, whether as a result of new information, future events, and developments or otherwise. This call will include a discussion of non-GAAP measures. The reconciliation of these non-GAAP measures can be found in the appendix to the presentation. With that, I will now turn the call over to Michael.

Thank you, Helen, and good morning, everyone. We appreciate you joining our fourth quarter earnings call. I'm pleased to report that we finished 2019 with great momentum. In addition to having strong revenue growth across our BioPharma business, continued margin expansion, and robust cash generation, we made great progress in executing our growth strategy and expanding our global capabilities. Since completing the largest US healthcare IPO in May, we have continually improved our leverage position, empowering us to drive the innovations and breakthroughs that help our life science customers dramatically improve patient outcomes. I would like to begin by covering some business highlights since our last earnings call on slide three. In November, we announced a new collaboration with the National Institute of Bioprocessing Research and Training in Dublin, Ireland. NIBRT is a global center of excellence for training and research solutions for the biopharmaceutical manufacturing industry. Its clients include a number of industry-leading companies, such as Pfizer, Eli Lilly, Amgen, Bristol-Myers Squibb, AbbVie, and Takeda. Avantour is working with NIBRT to address downstream bottlenecks in buffer preparation when producing monoclonal antibodies. In December, we opened our ninth innovation and customer support center. Our newest addition is in Shanghai, China, and will support accelerated process development for biologic therapies that will advance the development of life-changing treatments for patients in the region. It will specifically focus on enhancing industry capabilities in the development and manufacture of safe and effective biologic medicines such as monoclonal antibodies and cell and gene therapy. These treatments show great potential in China and are a fast-growing segment of the bioprocessing industry worldwide. We recently began a capacity expansion initiative at our Gliwice, Poland site that will support the growth of our biopharma production clients across Europe. We also initiated an expansion to our single-use production capabilities in Morrisville, North Carolina. We continue to experience a high win rate on new customer accounts as well as on contract renewals. I'm pleased to report that we are ahead of plan on our integration synergy targets and I remain confident with our goal of achieving 300 million of synergies by the end of 2020. We also recently successfully repriced our term loans lowering the rate on our U.S. dollar and Euro-denominated term loans by 75 basis points. And we're looking forward to repricing our bonds later this year. I also want to share some organization enhancements that we've implemented in recent weeks that will enable us to execute our long-term growth strategy. To enhance our ability to deliver workflow-based solutions in the lab, we've established a global laboratory products group, which will be led by Frederick Vanderhagen, EVP Europe, Frederick and his team will work to enrich our product offering and improve our solution selling for critical workflows. As with our other platform teams, the laboratory products group will work closely with our regional teams to accelerate the growth of our lab products portfolio. We recently announced plans to create two commercial subregions within our EMEA region. The substantial growth potential of this part of the world, especially in China, warrants more dedicated leadership So, Avantra will now have a commercial organization specifically for the India, Middle East, and Africa region, IMEA, and another for the Asia-Pacific region, APAC, that includes Greater China, Korea, and Southeast Asia. Dev Ori is serving as Executive Vice President for IMEA, and we've hired Sven Henrichwork as our new Executive Vice President for the Asia-Pacific region. Sven brings more than 20 years of leadership in the biotech, life science, and medical technology industries, including more than 12 years at GE Healthcare. We welcomed Mark Murray to Avantour as Executive Vice President of the Biomaterials and Advanced Technologies Platform. Mark brings extensive global sales, marketing, operations, and strategy leadership in key related industries through his more than 25 years of experience at McKinsey, Honeywell, and Celanese. Lastly, Mark Centrella joined Tom's organization in December as Vice President, Corporate Strategy, and M&A. While our top priority remains deleveraging the balance sheet, it is important that we begin to rebuild our M&A capabilities and processes. Mark has a rich background in the life sciences space and has been tasked with rebuilding our M&A capability. Also, earlier today, we announced that Cory Walker, Executive Vice President for the Americas Region, has resigned from his position to pursue a role outside of the life sciences industry that will allow him to move his family closer to other relatives. We have already begun our search for a successor, and until one is hired, I will oversee our high-performing Americas region. We are fortunate to have a very experienced leadership team in our Americas region who are committed to capitalizing on the many opportunities before us in this important region, and I'm confident that we won't miss a beat. Including the additions that I just described, we have built a high-caliber leadership team over the last few years and have added significant life sciences capability and depth. Aided by the Avantor business system, the hallmark of the team continues to be its ability to execute, and we're well positioned for another great year. Moving to slide four, you can see the financial highlights of the fourth quarter. Organic revenue growth was 4.3% for the period and 5.1% for the full year, including high single-digit growth in our biopharma business in the fourth quarter, reflecting ongoing strength in our portfolio of customized proprietary solutions. the biopharma end markets remain healthy around the world, and we experience attractive growth in each region. This segment accounts for approximately half of our total sales, and we expect biopharma to continue to be the strongest driver of our future growth. The other growth platforms that we have discussed, including services and biomaterials, also had high single-digit growth in the quarter. We did experience a continuation of softer trends in the industrial markets, as we noted in the third quarter, and our growth was somewhat tempered by a weaker year-end budget flush in both Europe and the Americas. Our adjusted EBITDA margin for the quarter was up 12.7%, excluding adverse currency impacts, reflecting an improvement of 131 basis points for the quarter and 95 basis points for the full year. These results reflect stronger volumes in pricing, a continued improving mix of proprietary product sales, the ongoing impacts of the VWR synergies, and the execution discipline enabled by the Avantour business system. Our adjusted earnings per share increased nearly 90% this quarter to 19 cents per share and are up approximately 62% for the full year to 58 cents per share, hitting the high end of our guidance. The excellent performance reflects strong operational execution as well as the benefit of reduced interest expense and an improved tax rate. We expect that these factors will continue to drive significant earnings improvement going forward. The fourth quarter also reflected significant strength in cash flow generation and deleveraging. Our unlevered free cash flow in the quarter was $188 million, representing 97% of the adjusted net income, excluding interest expense. Net leverage declined to 4.6 times EBITDA in the quarter, down from 4.8 times EBITDA at the end of the third quarter, and from 7 times EBITDA at the beginning of the year. In addition to the impact from the IPO earlier this year, Our growth in EBITDA and focus on working capital have also contributed to 2019 deleveraging. And as Tom will discuss later, we expect further improvement during 2020. With that, let me turn it over to Tom.