Avantor, Inc.

Good morning. My name is Katie, and I will be your conference operator today. At this time, I would like to welcome everyone to Avantor's first quarter 2022 earnings results conference call. If you would like to ask a question during the presentation, you may do so by pressing star 1 on your telephone keypad. I'd now like to hand the call over to Tommy Thomas, Vice President of Investor Relations. Mr. Thomas, you may begin the conference.

Good morning. Thank you for joining us today. 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 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'll 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. As you have hopefully seen in the press release we issued last night with our first quarter results, we started the year with another outstanding quarter. Our strong results across all key financial metrics, including revenue growth, margin expansion, earnings growth, and free cash flow generation, highlight our premium position in attractive end markets, our compelling product and service offerings, the resiliency of our business model in a dynamic macro environment, and our continued track record of execution. In the first quarter, we achieved 7.3% core organic revenue growth, driven by continued momentum across our life sciences platform, as well as in our applied end markets. We expanded EBITDA margins by approximately 140 basis points, including the favorable impact of our 2021 acquisitions and expansion in our core business, despite intensifying inflationary pressures. We increased adjusted net income by approximately 15 percent and generated approximately $128 million of free cash flow. We also made significant progress in executing our long-term growth strategy. We continue to invest in capacity and infrastructure to support our growth and currently have more than two dozen manufacturing expansion projects in flight, five of which were completed in the first quarter. Our 2021 acquisitions delivered strong core growth and margins ahead of our internal operating plan, and we are pleased with our progress on integration, including commercial synergies. Tom will provide additional M&A color later in the presentation. We remain focused on helping scientists realize the potential of new breakthroughs and introduce several new proprietary products in the first quarter. We launched multiple offerings targeting the cell and gene therapy markets. including our proprietary cell lysis solution for use in adeno-associated viral vector production, and a reagent used to remove closed-cell DNA and RNA impurities. We also executed a partnership agreement that will enable us to offer custom cGMP plasma DNA for viral vector, mRNA, and nucleic acid workflows. To expand our offering in the LC-MS analytical workflow, we also launched a new line of JT Baker analytical syringe filters, Additionally, we introduced new products in our formulated silicone platform, including a proprietary formulation for novel in situ surgical applications and a thermal management solution for electronic applications. Looking ahead, we have good momentum in our end markets. Our order book is growing and we continue to leverage the Avantour business system to drive execution in a challenging operating environment. We will continue to progress the integration of our recent acquisitions and are actively working our M&A pipeline. We remain confident in delivering another great year with strong growth and robust margin expansion, enabling us to raise our EPS guidance for the full year. Moving on to slide four, I'd like to touch on some macro factors impacting our space. I'm starting on the left with concerns regarding the strength of the global economy. Encouragingly, the vast majority of the end markets we serve are growing mid to high single digits. Fueled by continued strength of the core monoclonal antibody workflow and the emerging modalities of cell and gene therapy and mRNA, biopharma activity in both R&D and production remains high. Core healthcare continues to expand, and growth in our advanced technology and applied materials business accelerated quarter over quarter. Within our applied platforms, we have exposure to many different end markets, including semiconductors, chemicals, energy, and food and beverage, and we are not seeing any signs of slowdown. Demand patterns in each of the three regions we serve are also holding up well, and we continue to benefit from our unparalleled customer access and a resilient, highly recurring revenue model. The geopolitical situation in Russia and Ukraine remains volatile, and our hearts are with those affected by this tragic conflict. We have ceased all sales to Russia, which historically have averaged about $5 million per year, and do not have any cash or working capital exposure. In keeping with our values, we donated nearly $1.2 million in gloves and masks, and we are working with our associates throughout Europe to collect critical items such as food, blankets, and clothing to donate to Ukraine refugees. Moving to COVID, the situation continues to evolve, and we are encouraged to see sustained declines in severe infections and deaths. Our COVID-related offerings, including personal protective equipment, diagnostic testing kits, and vaccine content, represent less than 3% of our total revenue, and the strength of our core business will more than offset the 2% to 3% headwinds we anticipate in 2022. Additionally, the fungibility of our bioproduction capacity to support both COVID-19 vaccines and therapeutics, as well as our core business, give us flexibility to offset any incremental headwinds created from a transition to an endemic phase. Also, the ongoing lockdowns in Shanghai have had limited impact on our business, given our relatively modest exposure to the region. Not surprisingly, we are facing historically high levels of inflation in virtually all of our cost categories. Nevertheless, Our organic margin expansion in the first quarter is a proof point of our ability to manage through this cycle leveraging the Avantour business system to drive commercial excellence and productivity initiatives. Industry-wide supply constraints, including the supply of raw materials and ongoing transportation delays, have been part of our reality since the onset of the pandemic. Consistent execution and managing a complex supply chain are part of our DNA, and we are confident in our ability to mitigate further challenges. In addition to leveraging the ongoing benefits associated with our global footprint, we have undertaken several initiatives to ensure that we can continue to meet our customers' expectations. We are increasing our manufacturing and distribution capacity throughout our network. We recently approved additional investments on our Phillipsburg site that will nearly double our global capacity for salts. and we are adding CGMP manufacturing capacity in Singapore to serve biopharma customers in the EMEA region. We are expanding supply chain operations headcount globally and increasing recruiting and retention activities accordingly. Finally, we continue to fortify our inventory levels, broaden our supplier partnerships, and optimize our transportation network to ensure that we can supply the products our customers need to continue their scientific work. The final point to mention is the rising interest rate environment. Despite the expectation of rising rates, our debt financing strategy has enabled us to confirm our original 2022 interest expense estimate. And we are well positioned against future rate increases given limited maturities over the next five years and the expectation of ongoing deleveraging. Tom will take you through the details in a few minutes. We acknowledge that the macroeconomic situation is challenging in a number of ways. However, the resiliency of our business model and our track record of execution make us confident in our ability to continue to serve our customers and deliver our 2022 financial guidance. Moving to Q1 performance on page 5. Q1 organic revenue increased 5.1% and core revenue increased 7.3%. Total revenue grew 9.2% on a reported basis, including revenue contributions from MasterFlex, Ritter, and RIMBio. offsetting the impact of foreign exchange headwinds. Revenues within approximately 90% of our end markets grew mid to high single digits, including biopharma, where we realized more than 20% organic growth in our bioproduction platform. Advanced technologies and applied materials also grew high single digits, driven by notable strength in our proprietary offerings into the semiconductor market and healthy growth across most other customer groups. Adjusted EBITDA on the quarter was up 16.5%, reflecting approximately 140 basis points of margin expansion, resulting from the impact of our 2021 acquisitions, strong proprietary materials growth, and commercial excellence and productivity efforts to offset inflation. Our strong operating results drove adjusted net income growth of about 15%, in line with adjusted EBITDA growth. We generated free cash flow of about $128 million in the quarter, up about 14% from Q1 2021, despite increased investments to support our growth. We remain on track to achieve approximately 100% free cash flow conversion for the year. Our adjusted net leverage ended at four times adjusted EBITDA, down from 4.2 times in December and in line with our two to four times target leverage. With that, Let me turn it over to Tom to walk you through our financial results in more detail.