West Pharmaceutical Services, Inc.

Good day, and thank you for standing by. Welcome to West Pharmaceutical Services' first quarter 2024 earnings conference call. At this time, all participants are on 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 1-1 on your telephone. You will then hear an automatic message advising your hand is raised. Please note that today's conference may be recorded. I will now hand the conference over to your speaker host, Mr. Quinton Lai, Vice President of Investor Relations. Please go ahead, sir.

Thank you, Olivia. Good morning, and welcome to West's first quarter 2024 conference call. We issued our financial results this morning, and the release has been posted in the investor section on the company's website located at westpharma.com. This morning, we will review our financial results provide an update on our business, and present an updated financial outlook for the full year 2024. There's a slide presentation that accompanies today's call, and a copy of that presentation is available on the investor section of our website. On slide four is our safe harbor statement. Statements made by management on this call and in the accompanying presentation contain forward-looking statements within the meaning of U.S. federal securities law. These statements are based on our beliefs and assumptions, current expectations, estimates, and forecasts. The company's future results are influenced by many factors beyond the control of the company. Actual results could differ materially from past results, as well as those expressed or implied in any forward-looking statement made here. Please refer to today's press release as well as any other disclosures made by the company regarding the risk to which it is subject, including our 10-K, 10-Q, and 8-K reports. During today's call, management will make reference to non-GAAP financial measures, including organic sales growth, adjusted operating profit, adjusted operating profit margin, and adjusted diluted EPS. reconciliations and limitations of the non-GAAP financial measures to the most comparable financial results prepared in conformity to GAAP are provided in this morning's earnings release. I now turn the call over to our CEO, Eric Green.

Thank you, Quentin. Good morning, everyone. Thanks for joining us today. We will start on slide five, where I'd like to cover a few topics. we will review Q1 performance. Second, we will provide an update on the markets that we serve as well as updates on our growth initiatives. And third, we will provide an update to our full year 2024 financial outlook. Now, turning to the financial results, we delivered a solid start to the year. During the quarter, we again saw growth in our top-tier HVP component, NovaPeer, and our HVP devices, such as SmartDOS. We also continued to see inventory management or destocking by our larger, mature customers that are working down their inventory closer to pre-pandemic levels. With that said, Q1 had a solid start due to favorable order timing of customer deliveries fulfilled in the quarter. I want to address the question that many of you are asking. Are we seeing an inflection in destocking? The short answer is not quite yet. Several customers are still working through their safety stock levels, and we still expect Q2 to have an impact from customer destocking. and customer order trends continue to indicate a stronger second half of 2024 with a return to more typical order patterns in Q4. Therefore, after a solid quarter, we maintain our full-year net sales guidance. Turning to slide six. we continue to have an active year of capital expansion projects that are increasing capacity to meet growing demand for both our proprietary products and contract manufacturing segments. In our proprietary product segment, we have expansion projects in several of our HVP components manufacturing sites, such as Jersey Shore, Kenston, Waterford, and Eschweiler. These projects will provide a combination of increased manufacturing capacity, especially HVP processing, awashing, sterilization, and envision, as well as bring a higher level of global standardization throughout our network. We believe that this favorably positions West to address anticipated growing demand for HVP components, from volume growth of legacy drugs from recently launched or to be launched drugs and potential conversions from legacy customers to higher levels of quality in response to the global regulatory changes. Last quarter, we mentioned one such regulatory change was the European Union GMP Annex I. We continue to emphasize that that adoption. Both timing and level of HPP will vary from customer to customer and from drug to drug. What we are seeing in Q1 is an acceleration of interest from customers as Annex 1 calls for higher quality, lower particulate, and more stabilized solutions. Earlier this month at the Interfex Conference in New York, Annex 1 was a key topic of discussion with customers as we highlighted our innovative approach and leading products of Westar Select and NovaPeer. Also, in the proprietary product segment, we're making progress with capacity expansion of our HVP devices, including smart dose, self-dose, and admin systems. For the near term, we're working to layer in capacity through productivity optimization programs. And for the longer term, we are adding capacity that incorporates automation to complement our manual processes. With our contract manufacturing, we continue to build out capacity at our Grand Rapids site and significant expansion at our Dublin facility, which are both in support of a customer's injection device platform. These expansions are critical to the overall volume growth that we continue to experience with growing demand for certain components associated with drugs for diabetes and obesity. Shifting to slide seven, we're maintaining our full year 2024 organic sales growth outlook of 2% to 3%. Our teams are actively engaged in working through our customers' inventory management, We expect improved growth along with stronger growth and operating margins in the second half of the year, with Q4 projected to be the strongest quarter. For the full year, we are maintaining general core cost discipline while reinvesting into new growth initiatives, as I just outlined. Now I'd like to turn the call over to Bernard. Bernard?