Avantor, Inc.

Good afternoon, my name is Grace and I will be your conference operator today. At this time, I would like to welcome everyone to a Venture Support Quarter and Full Year 2020 Earnings Results 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 then the number one on your telephone. If you require any further assistance, please press star zero. I will now turn the call over to Tommy Thomas, Vice President of Investor Relations. Mr. Thomas, can you begin the conference?

Thank you, operator, and good afternoon, 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 made 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 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. Michael?

Thanks, Tommy, and good afternoon, everyone. I appreciate you joining us today and hope the new year is off to a good start for you. I also hope that you and your families are staying healthy. Reflecting on 2020, the value of the significant transformation we have undergone since acquiring BWR in 2017 is clear. Organic growth has doubled. Margins in overall business profitability have increased substantially. and our leverage has now reached our target range of two to four times EBITDA. This transformation has positioned Avantor as a global life sciences leader, and there has never been a more exciting time to serve this space. As shown here on slide three, Avantor is deeply embedded in virtually every stage of the most important research, scale-up, and production activities in the industries we serve. Our model is grounded in supporting our customers' early phase discovery activities, And we serve as a one-stop shop in providing scientists all that they need to conduct their research. Our customer-centric innovation model enables us to provide solutions for some of the most demanding applications. And we leverage our access to the early-stage work to feed content and solutions that ultimately become specified into our customers' approved production platforms. Our fully integrated business model enables us to support our customers' journey every step of the way. Resiliency is an element of Montreux's business model that was demonstrated throughout 2020. Slide four provides an overview of our revenue across several dimensions. Our resiliency stems from the consumables-driven nature of our portfolio and our highly recurring revenue base. Approximately half of our revenue comes from proprietary branded products and services. These proprietary products are supplemented by innovative third-party offerings from our critical supplier partners. enabling us to provide comprehensive, workflow-driven solutions to our customers. We serve four end markets that feature similar characteristics, including high regulatory oversight and complex development processes. Approximately 70% of our revenue is in attractive life science end markets, including more than $1 billion in the bioproduction space. We have leading positions in the Americas and Europe and have a growing presence in the EMEA region, driven by our ongoing investments in core biopharma hubs like Singapore, Korea, and China. Moving to slide five, I want to share some highlights from the fourth quarter. As pre-announced last month, we ended 2020 with a Q4 organic growth rate of 14.9%, our strongest growth quarter of the year. Combined with solid margin expansion and strong cash flow generation, our results underscore the relevance and value of our business model and our team's ability to execute in a challenging environment. In addition to generating strong financial results, we also remain focused on driving innovation and growth across our core business. We enhanced our bioproduction offering through several technology launches in the quarter. Our Avantor top mixer single-use mixing system with integrated formulation programming enables consistency and reproducibility during media and buffer mixing processes. Our new sterile-end single-use high-pressure fluid handling system sustains pressure up to 150 psi, making it suitable for applications where temperatures are elevated and pressures exceed normal biopharma process conditions. Both technologies are compatible with our full line of single-use solutions, complementing and extending the range of our customer offering. During the quarter, our biomaterials business commercialized a controlled-release drug delivery technology for an HIV prevention application that has received a positive opinion from the European Medicines Agency. The technology leverages our flexible, high-purity silicone to continuously release an anti-HIV drug. We are proud of our role in expanding the HIV prevention options available to women, particularly those in geographies most affected by the HIV epidemic. We also completed the transformation of our capital structure by refinancing the remaining high-cost portions of our debt. Over the last couple of years, we have cut our weighted average cost of debt by nearly 50% and reduced our interest expense by over $300 million. This will give us significant financial flexibility going forward and positions us to pursue M&A opportunities that will accelerate growth and enhance our portfolio of proprietary offerings. Avantra remains an important partner in the fight against the COVID-19 pandemic. In addition to the PPE and testing solutions we offer, we are relevant in all vaccine modalities, including the mRNA and viral vector modalities that have already received emergency use authorization in several countries around the world. We continue to make appropriate investments to increase our critical file production clean room and manufacturing capacity to meet the growing production needs. The first clean room expansion in our North Carolina facility came online in the fourth quarter, and we expect additional capacity to be ready at our Massachusetts site by the summer. We're also working to increase our raw material manufacturing capacity with plans to bring additional capacity online for key products throughout the year. Additionally, our innovation team recently commercialized a silicone elastomer to support fluid transfer at extremely low temperatures, a critical requirement in the production of some of the COVID-19 vaccines. This is a good example of our integrated business model and highlights the value of leveraging the breadth of our portfolio to solve customer challenges. Turning to slide six of the presentation, I'd like to summarize our Q4 financial results. Organic revenues increased 14.9%, reflecting approximately 800 to 900 basis points of COVID-19 related tailwinds. Improvements in all our end markets, and importantly, mid to high single digit growth in our base business. Performance continues to be driven by BioPharma, where organic revenue growth exceeded 20%. BioPharma's broad-based strength in the quarter is indicative of the value we offer through our ability to collaborate directly with customers to characterize and scale up their formulations. In healthcare, we once again experienced double-digit growth driven by strong hospital and clinical reference lab activity that offset ongoing elective procedure weakness. It was an outstanding quarter in our government and markets, growth exceeded 50% as we were favorably impacted by COVID-related purchases. Adjusted EBITDA on the quarter was up approximately 21%, leading to adjusted earnings per share growth of approximately 57% to 29 cents. Our EBITDA margin rate growth continues to reflect the impact of volume leverage, favorable mix from our proprietary offerings, commercial excellence, and productivity. Tom will provide more details on adjusted EBITDA and EPS growth in just a few minutes. Our strong free cash flow generation drove 152% conversion of adjusted net income. For the full year, we generated $868 million in free cash flow, about 75% higher than the high end of our initial 2020 guidance, aided by strong EBITDA growth and lower interest and taxes. This full year performance enabled net leverage to reach our target range of two to four times EBITDA down from 4.6 times at the beginning of the year. Our results reflect our attractive end market exposure, highly recurring revenue base, trusted and collaborative customer relationships, and a strong culture of execution enabled by the Avantour business system, which underpins everything we do. With that, let me turn it over to Tom.