Avantor, Inc.

Good morning. My name is Ruwal, and I will be your conference operator today. At this time, I would like to welcome everyone to Avantor's third quarter 2021 earnings results conference call. At this time, all attendees are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. And to ask a question during the session, you will need to press star 1 on your telephone keypad. If you require any further assistance, please press star 0. Thank you. I will now turn the call over to Tommy Thomas, Vice President, Investors Relations. Mr. Thomas, you may begin the conference.

Mr. Good morning. Thank you for joining us today. 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 Relations 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 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 date that they are made. 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. Michael?

Thanks, Tommy, and good morning, everyone. I appreciate you joining us today. I'm starting on slide three. By now, you've seen our press release highlighting Avantor's third quarter results, which reflect strong business momentum across our end markets and our team's continued track record of execution. We achieved 10.2% organic revenue growth in the quarter, including a core growth rate of 8.5%, and COVID tailwinds of approximately 1.7%. The COVID tailwinds were principally driven by our vaccine-related offerings. In addition to delivering double-digit organic top-line results, we grew adjusted EBITDA nearly 26%, resulting in EBITDA margin expansion of approximately 180 basis points. Adjusted EPS grew 48% to 35 cents per share. In September, we announced a definitive agreement to acquire MasterFlex, a leading global manufacturer of peristaltic pumps and aseptic single-use fluid transfer technologies, expanding our proprietary single-use offering for bioproduction. We have since received all required regulatory clearances, have secured the necessary financing, and intend to close the transaction in short order. I will share more details about the transaction in a moment. We are committed to our role as a leader in life-changing science and remain focused on driving innovation and growth with investments in capabilities and capacity. This quarter, we advanced several expansion initiatives, including our production capabilities for key chemicals used in upstream and downstream applications in the bioproduction workflow. We also advanced our hydration expansion strategy and recently opened our new European single-use facility in the Netherlands. Additionally, demonstrating our commitment to helping scientists realize the potential of breakthroughs through innovation, we announced a commercial agreement with Oxford Nanopore Technologies, a market-leading manufacturer of next-generation sequencing instruments, kits, and consumables. The agreement combines the breadth and depth of Avantor's global laboratory customer relationships across all of our end markets with the sequencing technology from Oxford Nanopore. It will provide scientists broader access to Oxford Nanopore's portable, real-time Nanopore sequencing device, along with associated consumables and reagents through Avantor's channel. Looking ahead, we believe our role in the innovation ecosystem positions us for continued business momentum. We expect our core business to remain strong in the fourth quarter and are once again raising our guidance for the full year. Tom will share details on this in a few minutes. During our recent investor day, we described how our distinctive capabilities set us apart from our competitors and position us for long-term sustainable growth. Our third quarter results prove the strength of our business and how our products and services enable scientific breakthroughs. We are in the process of finalizing our 2022 operating plan and anticipate delivering another outstanding year in line with our long-term targets. We will share more details with you as part of our fourth quarter earnings call early next year. Moving on to slide four, I'd like to reiterate some of the highlights from our recent announcement about our pending acquisition of MasterFlex. MasterFlex will further strengthen our single use offering for the high growth biopharma end market. For more than 50 years, MasterFlex has been providing industry leading fluid transfer technologies that play a central role in biopharma research and production workflows. MasterFlex's technologies are relevant across all established and emerging biopharma platforms, including monoclonal antibodies, cell and gene therapy, and mRNA, and support both vaccine and therapy manufacturing, including COVID-19. More than 80% of MasterFlex's revenue is concentrated in biopharma, giving us access to a $5 billion addressable market that is growing high double digits and provides us a fully integrated solution for managing aseptic fluid transfer throughout the bioproduction workflow. The single-use fluid transfer space is an area of significant growth for Avantor, supported by the expansions of our facilities and our previously announced acquisition of RIMbio. Our single-use platform has been a key organic revenue driver of bioproduction sales to date, and we see this acquisition as a further accelerator of our overall organic revenue growth rate. This transaction meets both our qualitative and quantitative acquisition criteria and is a great example of our M&A strategy in action. Our customers will benefit from our fully integrated aseptic fluid transfer solution throughout the bioproduction workflow, and our financial profile will be enhanced by MasterFlex's double-digit revenue growth and proprietary gross margins. As I mentioned, we expect to close this transaction in short order and are looking forward to welcoming the MasterFlex team to the Avantor family. Turning to slide five, I'd like to summarize our third quarter financial results. Revenues increased 10.2% on an organic basis and 14.3% on a reported basis, including the impacts of foreign currency exchange tailwinds and the Ritter and RIMBio acquisitions. All regions and all product groups experienced strong organic growth. Overall performance was driven by our biopharma end market growing high teens with nearly 26% growth in bioproduction. We also experienced high single-digit growth in the advanced technologies and applied materials end market for the second consecutive quarter. COVID tailwinds contributed about 1.7% to our organic growth with the largest driver being proprietary materials and consumable sales to support the production of COVID-19 vaccines. As expected, aggregate COVID tailwind contributions declined sequentially, reflecting a decline in revenues from diagnostic testing. We continue to expect COVID-19 tailwinds of around $400 million for the full year, compared to approximately $250 to $300 million in 2020. Adjusted EBITDA in the quarter was up 26%, reflecting strong top-line growth, favorable mix, including nearly 20% growth in sales of proprietary materials and consumables, and outstanding execution enabled by the Avantor business system. Despite ongoing inflation in excess of historical trends across a number of cost categories, including raw materials, third-party products, transportation, and wages, we leveraged our ABS toolkit to expand EBITDA margin by approximately 180 basis points. Adjusted earnings per share grew more than 48%, reflecting the strong EBITDA growth along with lower interest expense and a lower income tax rate. we generated $229.3 million in free cash flow in the quarter, more than 100% of adjusted net income, while at the same time doubling our capex investment over the prior year to support our growth initiatives. Our adjusted net leverage ended at 3.5 times adjusted EBITDA, down 0.3 times from the second quarter, reflecting our strong cash flow and sustained traction in deleveraging. The funding of the master flex transaction will obviously increase leverage in the fourth quarter, but we fully expect that our strong cashflow profile will have us within our targeted leverage range of two times to four times adjusted EBITDA by the end of 2022. In summary, our third quarter financial results reflect the strength and relevance of our portfolio, our integrated offering and exposure to the biopharma space and our unwavering focus on execution supported by the Avantour business system. I am proud of our team for delivering another strong quarter and confident in our outlook for the fourth quarter and beyond. With that, let me turn it over to Tom to walk you through our results in more detail.