Avantor, Inc.

Good afternoon, my name is Annie and I will be your conference operator today. At this time, I would like to welcome everyone to Avantor's first quarter 2021 Earnings Results Conference Call. At this time, all participants line are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. Please be advised that today's conference is being recorded. I will now turn the call over to Mr. Tommy Thomas, Vice President of Investor Relations. Mr. Thomas, you may 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 Selozic, 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 also be made available on our website after the call. Following our prepared remarks, we will open up the line for questions. During this call, 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 day that they are made, 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. I'm starting on slide three. Avantour's first quarter results provide a terrific start to the year and underscore the value of our fully integrated business model and the relevance of our diversified portfolio. Driven by the Avantour business system, we delivered strong results across all core financial metrics. We achieved 13.5% organic revenue growth, and our core growth rate, excluding COVID tailwinds, improved for the third consecutive quarter. We continue to play a critical role in providing solutions and services to support the global response to the COVID-19 pandemic, and these COVID tailwinds accounted for approximately 700 basis points of growth in the quarter. We realized substantial EBITDA growth, expanded margins more than 300 basis points, and more than doubled adjusted EPS. Additionally, our leverage position continues to rapidly improve, and we received upgrades from all three rating agencies in the quarter. On April 12th, we announced the definitive agreement to acquire Ritter GmbH and its affiliates, a technology leader in high-precision consumables, expanding our proprietary offering for diagnostic and drug discovery workflows. I will share more details about the transaction in a moment. We continue to actively invest in biopharma production capacity, supporting our core business as well as COVID-19 vaccine production. This quarter, we advanced several important expansion initiatives. including projects at our Morrisville, North Carolina and Devons, Massachusetts facilities. We're also adding a second European single-use facility in the Netherlands. In total, we will increase our single-use manufacturing footprint by 30% and double our cleanroom space in the United States and Europe. We remain focused on driving innovation and growth across our core businesses and recently enhanced our bioproduction offering with the launch of JT Baker, Baker Bond chromatography columns to support downstream protein purification. These new columns have unique selectivity and enable higher purification performance across a wide range of platforms. Consistent with our integrated discovery to delivery model, Avonto bond resins are available to support scientists from early phase discovery through full-scale production and will drive long-term recurring revenues across multiple biopharma therapies. In our advanced technology platform, we created a unique space-grade silicone formulation that was used on the Lockheed Martin aeroshell, which helped protect NASA's latest rover, Perseverance, during the descent into the Martian atmosphere earlier this year. Our silicone materials performed a critical role in protecting Perseverance from extreme heat and particulate contamination, a great example of our proven ability to customize solutions for the most stringent and demanding applications. Looking forward, we expect our end markets to steadily improve throughout the year. Growth in April has kept pace with the first quarter, and the order book in our longer cycle businesses, including biopharma production, continues to grow. Based on these favorable market dynamics and our strong first quarter performance, we are raising our full year revenue, EBITDA, and EPS guidance. We will share details on this in a few minutes. Moving on to slide four, I'd like to reiterate some of the highlights from the announcement of our definitive agreement to acquire Ritter GmbH and its affiliates. Ritter is a fast-growing technology leader in high-precision consumables for automated liquid handling in clinical and research applications. We've noted in prior presentations that M&A offers opportunities to accelerate growth, enhance our portfolio of proprietary offerings, and ultimately provide more comprehensive, workflow-driven solutions for our customers. In that context, Ritter's platform is an excellent strategic fit with Avantor, as it addresses all these dimensions and applications and end markets that we know well. Additionally, our combined businesses share similar characteristics, including a highly recurring specification-driven revenue profile. One important element of this acquisition is the attractive end market dynamics and the addition of approximately $7 billion in total addressable market in application areas such as clinical diagnostics, drug development, and clinical trials. We're excited to bring together Ritter's proprietary offerings and manufacturing capabilities with Avantor's broad reach and deep customer relationships to generate incremental growth and margin expansion. The transaction is expected to close in the third quarter, and we anticipate that it will be immediately accretive to adjusted earnings per share. For further information about the acquisition, please see the recorded presentation on the investor section of our website. Turning to slide five of the presentation, I'd like to summarize our first quarter financial results. Organic revenues increased 13.5%. All regions and all product groups experienced double-digit organic growth. Overall performance continues to be driven by our biopharma end market, where organic revenue growth once again exceeded 20%. We are encouraged to see several leading indicators that point to the ongoing recovery of our end markets, particularly in the United States, including the resumption of clinical trial activities, the return of scientists and researchers to R&D labs, and the rebound in elective surgical procedures. Importantly, our elective procedure-related revenues returned to pre-pandemic levels in the quarter, COVID-19 related tailwinds contributed approximately 700 basis points of revenue growth. We play a critical role in providing solutions and services to support COVID-19 testing workflows, head to toe personal protective equipment and customized materials needed to produce vaccines and therapies. There was continued demand for our testing and PPE solutions during the quarter, and we realized a significant step up in the contribution from our support of vaccine production. We are proud to play a role in the global COVID-19 response, and we see opportunities to participate in future mRNA and viral vector-based vaccines and therapies for other applications. Adjusted EBITDA in the quarter was up 38%, leading to adjusted earnings per share growth of 101% to 35 cents. Our EBITDA margin growth continues to reflect the impact of volume growth, productivity, and the favorable mix from our proprietary offerings. Tom will provide more details on adjusted EBITDA and EPS growth in just a few minutes. We generated $112 million in free cash flow in the quarter and are reiterating our full year free cash flow guidance of over $800 million. Our cash performance and earnings momentum enabled a reduction to our adjusted net leverage from four times EBITDA at the end of last year to three and a half times EBITDA at the end of the first quarter. We now expect our leverage to remain under four times throughout the year, even after we close on Ritter. You will recall that our long-term target is two to four times EBITDA. In summary, our results reflect our resilient portfolio, relevant market position, and unwavering focus on execution. As always, we remain committed to building trusted and collaborative relationships with our customers and driving a culture of continuous improvement and execution through the Avantour business system. With that, let me turn it over to Tom.