Avantor, Inc.

Ladies and gentlemen, thank you for standing by, and welcome to the Avantour Third Quarter 2020 Earnings Conference Call. At this time, all participants are in 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. We ask that you please limit your question to one and one follow-up question. Please be advised that today's conference is being recorded. If you require further assistance, please press star zero. Thank you. You may begin.

Thank you, operator, and good morning, everyone. Thank you for joining us on today's call. We made the decision to accelerate the timing of our earnings release and conference call to coincide with our debt offering. We appreciate the flexibility in joining us this morning. 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.avantourscientist.com. A replay of this webcast will be made available on our website after the call. Following our prepared remarks, we will open 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 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'd like to turn the call over to Michael. Michael?

Thanks, Tommy. I'm starting on slide three with a brief review of Avantor's revenue profile. Avantor is uniquely positioned to offer complete solutions for many scientific workflows. We are among the most recognized and trusted global providers of products and services to the life science and advanced technology industries. And our portfolio is used in virtually every stage of the research, development, and production activities our global customers conduct. Our business model is very resilient due to our consumables-driven portfolio and highly recurring revenue base. Approximately half of our revenue comes from proprietary branded products and services, and no single customer represents more than 3% of our revenue. Approximately two-thirds of our revenue is in attractive life science and markets, including significant exposure to the bioproduction space. We're well positioned for continued growth in Europe and the Americas, and we're investing to expand our capabilities in emerging markets throughout Asia, the Middle East, and Africa. Moving to slide four, here are the third quarter business highlights. The team continues to execute extremely well in a challenging environment. We grew our top line more than 5% organically, expanded margins more than 100 basis points, increased earnings per share by more than 60 percent, and generated $266 million in free cash flow. I will cover these results in more detail on the next slide. Serving our customers and supporting them in their mission-critical work remains a top priority for us and one of our core values. Fortunately, all of our distribution, research, and manufacturing sites have remained fully operational, and we've been able to leverage our global scale and footprint to maintain supply to our customers throughout the pandemic. Bringing innovation and developing new workflow solutions is another important element of our customer-centric business model. During the third quarter, we launched multiple products to enhance our BioPharma offering, each one creating significant value to our customers. For example, we expanded our single-use portfolio with the addition of new 2D single-use bags, demonstrating our commitment to ensuring our customers have a complete range of packaging options available to meet their needs. We expanded our large-scale direct dispense packaging offerings, significantly reducing customer processing time, and minimizing contamination risk. Our Omnitop adjustable volume sterile sampling solution enables precise sample collection at very low volumes and also minimizes contamination risk, a particular benefit for our cell and gene therapy customers. We also launched JT Baker CGMP-grade IPTG, a molecular reagent used by our bioproduction customers to trigger transcription and increase protein expression. We are in the midst of commissioning our new biorepository site in Germany and expect to receive our first samples before the end of the month. With 40,000 square feet of temperature and humidity controlled space, this new facility will complement our existing biorepository and archiving capacity in Europe, enabling us to serve the growing clinical trial support needs of our bar pharma, pharma, and CRO customers. Avantor is a critical player in the COVID-19 vaccine and therapy supply chain, and we continue to collaborate closely with biopharma customers and relevant governmental authorities around the world, including representatives from Operation Warp Speed. Our extensive portfolio of products and workflow solutions to support patient testing, research and development, clinical trial services, and ultimately the production of approved treatments and vaccines make Avantor an important partner during this unprecedented time. We're actively supporting multiple technologies in each of the key vaccine modalities and are making the appropriate investments to increase our cleanroom and manufacturing capacity to enable us to ramp production to support commercial production of any approved vaccines. Our mission of setting science in motion to create a better world has never mattered more. Turning to slide five of the presentation, I'd like to review our financial results in more detail. Organic revenues increased 5.4%, reflecting 300 to 400 basis points of COVID-19 tailwinds, improvements in all of our end markets, and low single-digit growth of our base business. Performance was once again headlined by Biopharma, which grew by double digits in the quarter. As complexity in drug development grows and drugs increasingly become defined by the process, not the product, our comprehensive portfolio of raw materials, production technologies, and innovation capabilities position us to excel in this space. Our strong performance in the third quarter is indicative of the value we offer through our ability to collaborate directly with customers to characterize and scale up their formulations. Also, we experienced strong double-digit growth in healthcare, driven by strength in hospital and clinical reference labs. Adjusted EBITDA in the quarter was up approximately 14%, or more than 2.5 times our revenue growth, and adjusted earnings per share increased approximately 63% to 24 cents. We also continue to make good traction on tax planning and now forecast a full-year effective tax rate of 24%. We continue to generate strong free cash flow through solid operational performance and working capital discipline. We generated $266 million in the quarter, an increase of 44% compared to the same quarter last year, and are on track to generate more than $700 million in free cash flow for the full year, well above our initial full-year guidance. This will enable ongoing reduction in our net leverage to approximately four times EBITDA by year-end, down from 4.6 times at the beginning of the year. Our results reflect our attractive end-market exposure, our highly recurring revenue base, trusted and collaborative customer relationships, and our strong culture of execution enabled by the Avantor business system, which underpins everything we do. With that, let me turn it over to Tom.