Avantor, Inc.

Good morning, ladies and gentlemen. My name is Irene, and I will be your conference operator today. At this time, I would like to welcome everyone to Aventer's Second Quarter 2022 Earnings Results Conference Call. I will now turn the call over to Christina Jones, Vice President of Investor Relations. Mrs. Jones, you may begin the conference.

Good morning. Thank you for joining us. 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.avonturesciences.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 as a result of new information, future events, or other developments. 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.

Thanks, CJ, and good morning, everyone. I appreciate you joining us today. I'm starting on slide three. As we announced in our press release, we delivered another outstanding quarter with strong results across all key financial metrics, including core revenue growth, margin expansion, earnings growth, and free cash flow generation. Our results kept a strong first half of the year and highlight our exposure to attractive end markets, our differentiated product and service offerings, the resiliency of our business model in a dynamic macro environment, and our continued track record of execution. Continuing our momentum from the first quarter, we achieved 6.4% core organic revenue growth on an 18.4% comparable from a year ago, driven by continued strength in biopharma and advanced technologies and applied materials. Once again, our core bioproduction business grew over 20% in the quarter, and we are set up for continued growth with a robust order book, reflecting the ongoing strength of the biologics pipeline and our broad exposure to all modalities. We expanded EBITDA margins by over 140 basis points, including strong expansion in our core business and benefits from our 2021 acquisitions. Through the first six months of the year, our core organic revenue growth and margin expansion are tracking our 2022 guidance and above our long-term targets. As we execute our operating plan, we also continue to progress our long-term growth strategy through product innovation, exciting new collaborations, and ongoing capacity expansion projects. In the second quarter, we launched new products in several areas, including JT Baker high-precision consumables, viral inactivation solutions, as well as a new line of MasterFlex pumps with an advanced user interface to support customer fluid transfer needs in both lab and production environments. We also entered into collaborations with Gemini Bio to provide plasma DNA, and Cytobance to provide custom hydrated solutions and soil culture media to biopharma customers. With these collaborations, we have expanded our bioproduction offering and enabled our customers to utilize custom CGMP products through the full development cycle, including early stage research, scale up, and commercialization. We have several capacity expansion projects in flight and recently started construction in our Phillipsburg, New Jersey manufacturing site to significantly increase our global capacity for process ingredients to support growth in our bioproduction platform. Our M&A integrations remain on track, and we achieved several critical milestones for MasterFlex this quarter, including successfully executing on our planned ERP implementations in Europe, India, and China. At this point, all ERP integrations outside of the Americas are complete, and we remain on schedule to wind down all TSAs before year end. Ritter is now integrated into our portfolio, and we remain focused on executing on new product launches and commercial synergies. Looking ahead, we have good momentum in our end markets. Our order book is strong, and we continue to leverage the Avantour business system to drive execution in a challenging operating environment. We remain confident in delivering another year of strong financial results. Given the dynamic macro environment, we thought it would again be helpful to provide a brief update on some of the factors impacting our space. and how we are leveraging the Avantour business system to manage through these challenges. Starting on the left side of slide four, the global economy has become a bit choppier, with slowing GDP growth, tighter financial conditions, and the ongoing geopolitical conflict in Ukraine. Despite these headlines, we continue to see strength in our end markets. Notably, in the second quarter, we experienced more than 20% core organic growth in our bioproduction business, and strong growth in our semiconductor platform, that drove double-digit growth in our advanced technologies and applied materials and market. The order books for our proprietary businesses remain strong, highlighted by bio-production and biomaterials, where we have nearly a full year of demand on order. Moving to foreign exchange, U.S. dollar has strengthened considerably against most currencies since the beginning of the year. This presents incremental foreign currency translation headwinds for the roughly 40% of our business outside the U.S. In the second quarter, FX was a 4.4% headwind to reported revenue and impacted earnings per share by approximately 2 cents. Based on the expectation that the U.S. dollar will remain strong through the balance of the year, we have updated our full-year EPS guidance to reflect this impact. Regarding interest rates, our financing structure and strong free cash flows have enabled us to maintain our 2022 interest costs at the originally forecasted level, despite the escalation in U.S. LIBOR and URBOR indices. We also expect interest cost reduction in 2023 and beyond as we continue to delever and we have no significant required debt repayments until 2025. COVID headwinds increased in the second quarter to approximately 4%. Looking ahead, we expect full-year COVID headwinds of around 3%, reflecting approximately $100 million less COVID-related revenues than planned at the beginning of the year. as vaccine-related revenue is moderating faster than anticipated. We expect our core bioproduction business to offset this incremental headwind as we redeploy production capacity, and we are maintaining our full-year guidance for Avantor of mid-single-digit organic growth. We are encouraged by the recent improvements in China activity levels. However, the strict lockdowns in the quarter did create a roughly 50 basis point headwind to our top-line results. Excluding this headwind, our EMEA business grew high single digits on a core organic basis in the quarter. While inflation continues to impact nearly all our cost categories, we delivered over 140 basis points of margin expansion in the second quarter and first half. The Avantor business system is helping us deliver commercial excellence and productivity. And together with the favorable impact of our 2021 acquisitions, our first half margin expansion is above our 2022 full-year guidance of 125 basis points and above our long-term algorithm of 50 to 100 basis points per year. The final point on supply chain. The global supply chain has been constrained since the start of the pandemic. For example, in the second quarter, we faced printed circuit board and resin shortages which impacted our single-use revenues. We continue to leverage our global network to mitigate episodic supply chain issues and expect modest improvements over the course of the year. We remain confident that our investments across the network will enable us to continue to improve service levels and shorten lead times. While the macroeconomic situation is challenging, the resiliency of our business model and our track record of execution give us confidence in serving our customers and delivering strong financial performance. Moving to Q2 performance on page five. Second quarter core organic revenue growth was 6.4% on top of an 18.4% growth comparison from the prior year. Adjusted EBITDA on the quarter was up 10.2% driven by commercial excellence, a stronger weighting of proprietary offerings, and the favorable boost from our 2021 acquisitions. Our strong operating results drove adjusted net income growth of 11.1% and 37 cents of adjusted earnings per share this quarter. We generated free cash flow in excess of $190 million in the quarter while continuing to ramp investments in the business to support our growth. Our adjusted net leverage of 3.9 times adjusted EBITDA is in line with our two to four times target leverage, supporting our ongoing focus on building a robust M&A pipeline. With that, let me turn it over to Tom to walk you through our financial results in more detail.