Avantor, Inc.

Good afternoon. My name is Holly, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Avantour First Quarter 2020 Earnings Conference Call. After the speaker's remarks, we will have a question and answer session. To ask a question, please press star 1 on your telephone keypad. To withdraw a question, press the pound key. We do ask that you limit yourself to one question and one follow-up question. I will now turn the call over to Tommy Thomas, Vice President, Investor Relations. Mr. Thomas, you may begin the conference.

Thank you, Operator, and good afternoon, everyone. Thank you for joining us in 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 your questions. I would like to note that we will be making some forward-looking statements within the meaning of the federal securities law, 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 may 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. A 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, Tommy, and thanks to all of you for joining us today for our first quarter earnings call. Tommy Thomas started with us in March, and we're excited to have him leading the Avantour Investor Relations Program. Welcome, Tommy. I want to acknowledge the impact that the COVID-19 pandemic has had in the time since our last earnings call. Our team is doing a terrific job managing the business, despite the challenges of the current situation. And during the call today, we will share details about our efforts to provide the mission-critical products and solutions our customers need, while also ensuring the safety and well-being of our associates. I hope that each of you and your families are staying safe during this unprecedented time. I'm starting on slide three with a brief review of Avantour's revenue profile. Our diversified revenue base, combined with the customized nature of our solutions, makes our business model very resilient, even in a recessionary environment. We are very well positioned for continued growth in Europe and the Americas, and we are investing to expand our capabilities in emerging markets throughout Asia, the Middle East, and Africa. More than 85% of our business is recurring, and approximately half of our revenue comes from the proprietary branded products and services. No single customer represents more than 3% of our revenue, and approximately two-thirds of our revenue is in the life sciences space in attractive end markets such as biopharma and healthcare. Moving to slide four, I want to provide some insights into our first quarter business highlights. As the COVID-19 pandemic emerged, we quickly mobilized a global steering committee of cross-functional leaders to drive a swift and collaborative response across our business with a focus on safely providing business continuity to our customers. Throughout the pandemic, our distribution, research, and manufacturing sites have remained operational. To protect the health and well-being of our associates in these operations, we are closely monitoring and implementing guidelines from credible health agencies including the World Health Organization, Centers for Disease Control and Prevention, and the European Center for Disease Prevention and Control, as well as taking other precautionary measures. For the remaining workforce of sales and support personnel, we have implemented work from home processes, which we believe are working very well in the circumstances. I'm extremely proud of all our associates around the world who continue their tireless work serving our customers, including many who are working to develop vaccines and treatments for COVID-19. Our broad life sciences portfolio is being widely used in many COVID-19 related areas, including patient testing, vaccine and therapy development, clinical trial services, and ultimately in the production of approved treatments. We have moved rapidly to enable fast and accurate research results by offering products and protocols in sample collection, DNA and RNA extraction, serology, and real-time PCR. Our Bar Pharma customers are aggressively focused on therapy and vaccine research, and our capabilities and workflows such as cell culture, QPCR, protein purification and formulation are critical. With our broad customer access and extensive portfolio of products and solutions, Avantor is an important partner in the race for a COVID-19 cure. We also advanced key elements of our growth strategy in the first quarter. For example, we launched Prochiva, a proprietary protein A chromatography resin. This new product innovation focuses on downstream processing, enabling best-in-class purification performance for customers working with monoclonal antibodies, FC fusion proteins, and immunoglobin antibody molecules. This product will expand our addressable market by over $1 billion and enhance our margin profile over time. As you may recall, we've invested significant capital to build a world-class technology and innovation center in Bridgewater, New Jersey, to expand our bioprocessing capabilities. and Prochiva is one of the first of many new product innovations to come out of this center. Additionally, our previously announced investments to expand our hydration, single-use, HPLE sugars, and biorepository capacity are proceeding on schedule. We're excited for the future growth prospects that our investments are enabling, even in this challenging environment. In addition, we remain on track to complete the VWR Synergy Program in 2020, and our Avantour business system continues to gain traction across the enterprise in driving growth and productivity. Turning to slide five of the presentation, I'd like to share a few financial highlights from the quarter. Organic revenue growth was 4.1% for the period, representing solid growth on our toughest prior period comparison. Growth was led by high single-digit expansion in our biopharma business, where demand remains robust around the world. Growth was impacted by academic and government lab closures in Europe and the Americas late in the quarter, as well as by supply chain challenges associated with government-imposed border controls related to the pandemic. Excluding adverse currency impacts, adjusted EBITDA in the quarter was up 7%, and adjusted earnings per share increased approximately 64% to 17 cents per share. Double-digit revenue growth from proprietary materials was a key driver of our margin expansion in the quarter. Cash flow was very strong in the quarter. We generated 241 million of free cash flow, an increase of 284% compared to 2019. Combined with our earnings growth, this enabled us to reduce net leverage to 4.4 times, down from 4.6 times at the end of the fourth quarter of 2019. We remain committed to continued deleveraging as we approach our target leverage range of two to four times EBITDA. Before I turn it over to Tom to discuss the financials in more detail, I want to emphasize the resiliency of our business model. We are well positioned with a highly recurring revenue base, a broad product offering, significant exposure to attractive end markets like biopharma, and a strong culture of execution enabled by the Avantor business system. Avantor's mission of setting science in motion is more meaningful and relevant now than ever before, and our Q1 results reflect this resiliency. With that, let me turn it over to Tom.