Avantor, Inc. (AVTR) on Q1 2021 Results - Earnings Call Transcript
Operator: 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. . I will now turn the call over to Mr. Tommy Thomas, Vice President of Investor Relations. Mr. Thomas, you may begin the conference. Tommy Thomas: 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 Szlosek, Executive Vice President and Chief Financial Officer. A press release and a presentation accompanying this call are available on our investor website at ir.avantorsciences.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. Michael Stubblefield: Thanks, Tommy, and good afternoon, everyone. I appreciate you joining us today. I'm starting on Slide 3. Avantor'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 Avantor 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 3 rating agencies in the quarter. On April 12, we announced a 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 Devens, 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. Thomas Szlosek: Thank you, Michael, and good afternoon, everyone. Slide 6 shows our organic revenue growth by end market and product group for the quarter. Biopharma, representing approximately 50% of our revenue, experienced double-digit growth in the first quarter. Our biopharma production business grew over 30% in Q1, driven by strong contributions from both chemicals and single-use technologies. Our lab products business also experienced strong growth in chemicals, consumables and equipment, driven by positive trends in R&D activity. Health care, which represents approximately 10% of our revenue, also experienced double-digit organic revenue growth. Strength was driven by continued COVID testing momentum and a strong rebound of elective procedures. As Michael mentioned, we saw our medical implants business for elective procedures return to pre-pandemic levels in Q1. Education and government, representing approximately 15% of our revenue, experienced mid-teens organic revenue growth in the first quarter. Growth was driven by strength in government COVID-related sales and an incremental improvement in education as more university research activities resume. Advanced technologies & applied materials, representing approximately 25% of our revenue, declined by about 1% in the first quarter. This business continues to show modest signs of improvement, and we are encouraged by macroeconomic signals pulling us to a broader industrial recovery. We saw strong contributions in the quarter from both our AMEA industrial sector and our microelectronics business, offset by weakness in other sectors, including food and beverage. By product group, all our product categories experienced double-digit revenue growth, including our proprietary materials and consumables, driven by strong demand for our biopharma production platform. Notably, Equipment & Instrumentation experienced a significant recovery to double-digit growth, consistent with industry trends and reflecting an increase in CapEx investments as lab activities resumed. Let's move to Slide 7. Looking at growth from a regional perspective, Americas, which represents approximately 60% of global sales, reported 14.6% organic revenue growth and sequential improvement in daily rate of sales from the fourth quarter. Highlights were double-digit growth in biopharma, including approximately 40% growth in biopharma production and greater than 20% growth in health care, driven by hospital and clinical reference lab customers as well as a rebound in medical implants used in elective procedures. Education and government grew double digits, driven by COVID-related government purchases and education growth from COVID diagnostic demand. Michael Stubblefield: Reflecting on our first quarter, we are encouraged by the strong financial results and the continued improved core growth rate. We continue to execute well as evidenced by our significant margin expansion, EPS growth and deleveraging. We remain steadfast in our focus on executing our long-term growth strategy and our definitive agreement to acquire Ritter marks an important milestone in our transformation. on our exposure to the attractive biopharma end market by making additional investments to expand our manufacturing capacity. These investments will support vaccine and therapies to combat the COVID-19 pandemic and support our growing core business. Our biopharma order book continues to expand, further underscoring the relevance of our integrated discovery to delivery business model. As we look ahead, we are well positioned for continued growth and expect to deliver strong results for the full year. Avantor's mission of setting science in motion to create a better world has never mattered more. I want to thank you for your interest and investment in Avantor and for your ongoing support. I will now turn it over to the operator to begin the question-and-answer portion of our call. Operator: . We have a question from the line of Tycho Peterson from JPMorgan. Tycho Peterson: I'll try to squeeze two in. First on the COVID tailwinds. Obviously, you're bumping the guidance here. Testing tailwinds, obviously fading pretty quickly. So can you just talk a little bit about how you're thinking about the relative mix and what's really kind of prompting the increase? And then bioprocess, great numbers. Just curious, was there any element of stockpiling? And then also, how are you thinking about potential kind of mRNA and viral vector therapeutics beyond COVID, given your current capacity? Michael Stubblefield: Thanks, Tycho. It's Michael. I appreciate the question. In taking your first question here around the COVID tailwinds, as you noted, we've increased our outlook for the full year by -- at the center point, roughly $100 million. The mix continues to reflect kind of our original assumptions around the vaccine being 40% to 50% of the total tailwind for the year. And obviously, we've seen that ramp aggressively Q4 last year, certainly saw it ramping again in Q1. And we anticipate based on the order books and the improved vaccines that are out there for that mix to hold throughout the year. Testing for us was certainly strong in Q1. And as we're into the early days of the second quarter, we see it strong -- that strength continuing. And in this embedded in our kind of $350 million to $450 million guide on tailwinds for the full year, we would anticipate the diagnostic solutions that we offer in that 40% to 50% of total contribution level. Embedded in that at kind of the midpoint, of course, would still be, as you suggest, an expectation that we would see a decline in the second half of the year, which we've been pretty consistent about that view even in our initial guidance. How that plays out, obviously, is a little bit of an unknown. With infection rates, the way they're at around the world, we're still seeing continued strength in the diagnostics workflow. From bioprocessing perspective, the business continues to run at a very high level. As I mentioned in our prepared remarks, order book has continued to advance at a pretty impressive clip. And it's both vaccine driven as well as continued strength in our core business. The growth in monoclonal antibody production is continuing at a mid-to-upper teens level around the world, and we're certainly getting our share of that. So well positioned for a fantastic year. And as I mentioned in my remarks, we're focused on significant investments in capacity to continue to keep pace with the growth that we're seeing. We're excited about the expansion to both our chemicals as well as our cleanroom capacity for single use. And innovation continues to be an important theme. You mentioned mRNA and viral vectors beyond COVID. And I think when we look at the application, particularly mRNA to other non-COVID vaccines, we see that as a real opportunity longer term for the business. But will add to an already pretty important addressable market for us. So we're encouraged by not only the momentum in the current business, but we're excited by continued strength of funding as well as the application of some of these technologies to some new indications going forward. Operator: We have another question from the line of Derik De Bruin from Bank of America. Derik De Bruin: Basically, it's a little bit of more of a color on what Tycho just asked. So when we sort of think about testing for COVID for the rest of the year, I mean, can we look at current level, i.e., it's more of an even, I would say, sharp -- the graph is more steady rather than a sharp dropoff in the back half of the years ahead, given the bioprocessing. Is that fair to say? Michael Stubblefield: Yes. When you look at the midpoint, Derik, at roughly $400 million of total tailwinds for the year, and if you look at what we did in Q1, your point about it being relatively consistent throughout the year I think is fair. The mix may look a little bit different, particularly as we get into the back half of the year. I think -- as I mentioned to Tycho, our expectation would be that the diagnostic testing workflow could be a little bit weaker in the second half of the year than in the first half of the year. And we anticipate continued strength of vaccines. And I think PPE contribution should be relatively stable throughout the year. Derik De Bruin: Got it. That sort of leads to the question. I mean, should we think about the margin expansion? I mean you're obviously going to be up year-over-year. I think we -- correct me if I'm wrong, is the bioprocess should be higher margin than the diagnostics that we -- that's sort of the major driver? Michael Stubblefield: If you look at our proprietary materials and consumables solutions, of which most of our production solution will fall into that category, that obviously is the highest margin part of our business. So strength there is certainly an important driver of margins. It goes beyond bio production that we talked a bit about our NuSil platform. So it wasn't last -- in my prepared remarks there that we saw that business return to kind of pre-pandemic levels in the first quarter, which is going to be an important platform for us going forward. But our testing workflows, I think we do have a fair bit of content on those both from a chemical standpoint as well as a consumable standpoint. So the margins in that part of our workflow would come in above the group average, Derik. Thomas Szlosek: But even Derik, when you get to the margin expansion point, there are other factors besides the COVID mix that are driving that for the full year. We've got a really strong open order book beyond COVID, particularly in biopharma production. And those margins are superior to the overall weighted average of biopharma portfolio. So it's a -- you're right, it's a mix factor, but it's beyond COVID, given the growth dynamics in the portfolio. Operator: Our next question comes from the line of Doug Schenkel from Cowen. Doug Schenkel: First, on M&A, the Ritter deal. One, what's your capability mark, given you're going to be well within your target leverage range for the year? Two, beyond financial constraints, how would you characterize the organizational readiness for more? And three, how would you describe the deal pipeline at this point? So that's the first topic on M&A. And then on guidance, I was hoping that you'd be able to share more on your assumptions by end market in terms of what's incorporated into revenue guidance for the year. It would be great to get those assumptions for all end markets. That said, in particular, I think it would be interesting to hear more about biopharma and also advanced technologies and applied markets, given there are some signs of cyclical improvement. Thomas Szlosek: Okay. Thanks, Doug. This is Tom. Thanks for the questions. Yes, so the Ritter deal, when it closed, call it, early -- hopefully, early to mid-July, that will be just north of $1 billion of M&A capacity in U.S. dollars. It's a euro-dollar deal. But we think we have the capacity to -- for the rest of the year to have aggregate spending or spending out of individual deal, roughly that same number. So somewhere between $1 billion and $1.5 billion capacity for this year. And that -- when you get into 2022, that continues to grow, depending on what we've done. In terms of the organizational readiness, the -- I would say that this is the first deal that we've done since the large Avantor VWR deal. But we had a program management office in place that -- it has winded down because we've completed addressing that. But you certainly have the capacity from an integration perspective that we've demonstrated to be able to integrate deals that are 3x the size of Ritter. And we've been able to sustain the ongoing business as well while generating $300 million of synergies on VWR. So pretty good track record. And when you go back further, we've kind of sustained that over the years. So I would say there's a fairly high degree of confidence. Doing simultaneous multiple integrations, I mean, there does come a stretching point. But I don't think we're there yet. And I think we consider the capacity discussion in dollars, I think we have the capacity to integrate something of that size. In terms of the deal pipeline, as you know, we're focused in concentrating on areas where we have superior growth rates relative to the Avantor portfolio. And I think the Ritter demonstrates that very nicely. And also the better overall margin rates, both gross margin and EBITDA margin. That points us to a proprietary offering. And in both the lab space, some of the diagnostic opportunities as well as in biopharma production would be areas that are of most interest to us. And we're looking for a deal that has existing profitability and existing cash flow that will help us to speed up quickly. So we discussed about the continuing workflow. All the businesses are engaged. We have a regular pipeline review. We have capacity in that place. In terms of the guidance on the end market, so just to remind you, overall, we're guiding to 6% to 9% for the year. And for biopharma in total, that's probably close to high single digits to low double-digit kind of growth. From a health care perspective, it would be similar. From an education and government perspective, that is the area where we're seeing the most improvement year-over-year, given the decline in education last year. So that would be clearly in the double digits. In terms of advanced technology & applied materials, we're not forecasting a breakout, like we're not including a massive return to growth just yet. And so you can kind of consider that to be low single digits to mid-single-digit kind of growth expectation. Operator: We do have another question from the line of Vijay Kumar from Evercore. Vijay Kumar: One on guidance here. Michael, it looks like the base ex COVID is about 3.5% to 6.5%. I want to -- is my math correct on the base assumptions? And the low end, is that just conservatism because I think most of your peers are looking at mid to high. I'm curious what would cause us to get to the low end? Michael Stubblefield: Yes. Thanks, Vijay, for the question. I think it's important to recognize, firstly, we're out of a strong on Q1, 3 straight quarters now of sequential improvement in the core business. We were down a business day in Q1. If you adjust for that, our core growth rate in Q1 was, call it, 8% to 9% in the quarter. So really strong performance in the base business. And so clearly here, obviously, where the comps on the base business are going to get a little bit easier here, at least for the next couple of quarters before you run into a tough comp again in in the fourth quarter here. So when we break down the 6% to 9% I think Vijay at the midpoint on our COVID tailwinds, you're talking a couple of points of growth. So -- but we can probably point you to kind of 4% to 7% or so on the base business. Vijay Kumar: That's helpful, Michael. And maybe one for you, Tom. Margin performance in the quarter was extremely strong. It looks like proprietary products came in strong, it was mix driven. Like, why shouldn't that mix effect continue in the back half. And I'm curious that on the free cash flow side, our guidance wasn't changed, but I mean that Q1 free cash was very impressive, $240 million. That's almost 30% of the annual guide. So was there any timing impact on that free cash? Thomas Szlosek: Yes. So just on the margin performance, yes, first quarter was outstanding, 300 basis points improvement on EBITDA. I'd say about half of that came from gross margins and the rest was just really good controls around our SG&A spending and the volume leverage on those fixed costs. But between mix and productivity as well as good commercial attention to pricing relative to inflation, you had about 130 basis points or so on gross margin. You had the rest of the growth on SG&A. I would say that relative to the rest of the year, you have to consider the significance of that . When we recorded 15% or so growth in the fourth quarter of 2020, we created a tough baseline for ourselves. And so first quarter and second quarter, as we've said, are going to be the strong ones for this year. You will see real strong margin performance as well. I think in the second half of the year, we won't have quite that -- the volume leverage at least as we see it right now. We're on the upper end of the guide, which knock on we hope it will be, then I would expect us to be closer to the kinds of the margin expansion that we got in the first quarter and for what you would reasonably expect for the second quarter. On free cash flow, Vijay, the number for the first quarter of 2021 was $112 million. We were at $240 million in 2020. So we did have a bit of a decline. I would say it's 2 factors. One is just the growth in the business that necessitated investments in working capital. We probably added in the quarter roughly $50 million of inventory as you can see. But when we look at the inventory, the days, the number of days that we have in inventory days sales, it's roughly the same as what we had in what we've been carrying throughout 2020. So we're in a good shape on that. And on receivables, there was a sizable investment. But the March sales relative to last year were up about $100 million. And so you would expect to see a significant growth in receivables. So between receivables and inventory, you did have a bit of dilution on free cash flow, but we think that's going to support the future growth. We also have a couple of other elements. I mentioned the incentive comp payments. I mean the payout this year were twice what they were in the first quarter of last year. So all in the number that we -- the number we mentioned, it also includes investment. Our CapEx continues to be an area of focus. We mentioned several of the single-use investments that we made to support the growth in that business. All in, we're -- this is -- the performance is pretty much what we had expected. We didn't give guidance by quarter. But if we had showed you our plan, you would say that the performance of Q1 was pretty much dead-on what we would have expected, and that's in line with the $800 million for the full year. Could that be better? I hope so, but we want to kind of get another quarter or so behind us before we're working on this. So one other point I mentioned, Vijay -- I should mention is you might -- you'll recall all the refinancings we did last year. As part of those, we ended up moving the interest payment dates from the second quarter and fourth quarter towards the third quarter. So we pulled in about $50 million or $60 million of interest payments into the first quarter that were paid last year. So we'll get that back in the second quarter, should it be a really strong quarter from a free cash flow perspective. And looking forward to making you happy once again on cash with $800 million. Operator: We have another question from the line of Jack Meehan from Nephron. Jack Meehan: Just wondering if you could start by just giving a little bit more granularity on proprietary versus third-party sales in the quarter, both double-digit. Just any additional color there. And as you look at 2Q, I think you have some pretty easy third-party comps. Is that right? What's that going to mean for margin from 2Q? Michael Stubblefield: Thanks, Jack, for your questions. On your first question here regarding the strength of both proprietary as well as our third-party offerings in the quarter, we'll go into the double digits, obviously. I think it reflects the fact that is, one, when you look at the proprietary piece really aimed towards our bioproduction offering, so we're tracking strength in both our business there as well as in our -- in the vaccine production. But as you know, we're also, for the first time in the year, seeing growth in some of our other important proprietary offerings, including our biomaterials offering, for example. On the third-party side of things, obviously, strength there is being driven by a lot of the diagnostic testing workflows. And these are chemicals and consumables where we have some -- structurally some strong agreements there but also yield well above group average margins for us. So the growth being driven by return to lab and just general strength across biopharma and academia and health care, but also from a margin standpoint, certainly contributing to the 130 basis points of gross margin expansion that Tom referenced. So both trends in the quarter were pretty good for us. Jack Meehan: Great. And as one follow-up on COVID testing. It seems like you're expecting a little bit more durability here than some of your peers. Is there any color you can give around what the international mix you guys have there is? Is that one reason why you're expecting more kind of relative steadiness? Michael Stubblefield: That's a good question, Jack. But if you look at where our where our strength and testing has been, we've probably been a bit stronger throughout the pandemic in Europe than we have in the U.S. And clearly, there's a different level of infection rate in Europe. It's been persisting there, which we do see continuing. I think we've been pretty consistent in suggesting maybe even compared to a lot of data points that were out there, in that we would anticipate a bit of a falloff in the second half of the year. And that's still continues to be modeled into our -- into outlook here. But Q1 probably held up a bit stronger than what we had anticipated, and we're a month into the second quarter, and we see continued strength. We do see durability to testing that publicly occurs beyond this year. If you look at just the U.S. and the funding that's going to be available to support testing for K-12 schools and employers testing plans and getting associates back to work, just to name a couple of examples, we do think testing is going to be sustainable for foreseeable future, albeit perhaps at a more modest level than what we've seen here at the height of the pandemic. Operator: We have another question from the line Patrick Donnelly from Citi. Patrick Donnelly: Michael, maybe one for you just on the advanced technology piece, down low single this quarter. I think it had grown in 4Q. I think Tom you said you maybe expecting low single-digit growth for the year. Can you just talk through -- it sounds like you guys are encouraged by the macro signals, obviously, pointing to a broader recovery. Can you just talk about the outlook there? How conservative is that low single? And what should we be looking for in terms of kind of the macro at these to really suggest things are reflecting higher there? Michael Stubblefield: Yes. Thanks for the question, Patrick. I think first it is important to kind of maybe put that part of our business in context. It's about 1/4 of our overall revenues, with about half of that being in -- comes from the growth-oriented platforms with some semiconductor exposure. And that piece of the business continues to be pretty resilient. Our -- both our proprietary offerings and other third-party offerings into semiconductor manufacturing continues to be a strength for us. We then have maybe 10-or-so percent of the business that's linked to more cyclical end markets like petchem, oil and gas, food and beverage . Net-net, we were down just a tad below flat in absolute terms. I think it was a little less than 1% off in the quarter. So a modest year-over-year decline, certainly not contributing to the results significantly here. So I think plus or minus, the business is on track from where it's been performing. Even in pre-COVID times, we were expecting that part of the business to print kind of low single digits. So PMI is holding up where they're at and outlooks around the world, we would anticipate that business kind of sequentially improving throughout the year and certainly before the end of the year getting to kind of a low single-digit bucket, I think. Patrick Donnelly: It's helpful. And then maybe just on the bioproduction expansion. Was that always in the plan and you guys just pulled it forward a couple of years due to the strength of COVID on the cash flow side as well as the demand? And then secondarily, I think it's following up on maybe Tycho's question earlier. How robust is the demand there in terms of your confidence level that this expansion gets filled relatively quickly in terms of the capacity you're building out there? Michael Stubblefield: Great questions. So this part of our business, the single-use part of the portfolio, we've been describing for a couple of years now as growing north of 20%. And certainly, that's accelerated as we work through the pandemic. The base business itself continues to be strong. And then you add to that the demand coming from COVID. Our single-use offerings are very prevalent across these various production -- vaccine modalities. So we have an investment plan in place that we definitely had to accelerate to account for the tailwinds that we're seeing. And our order book, which we continue to reference as growing significantly. A significant part of that order book growth is in our single-use business. And it really is necessary to keep up with the growth as well as establish more normal lead times for our base business and for our offerings to put the capacity in place. So the capacity will be realized pretty much instantaneously. We're hiring ahead of the construction being completed so that when we turn the lights on, we're ready to go with full teams and full shift so that can meet the demand that we do have in place. I referenced in my prepared remarks to help keep up with the demand not only are we expanding existing facilities, but we were excited this week to announce the addition of a second site there in Europe that we've taken possession of that take us 2 or 3 months to get the facility ready to run. But by -- something by July, we'll produce single-use assemblies out of that facility. So the team's doing a great job, keeping up with the growth and making sure that capacity we're able to sustain it. Operator: We have another question from the line of Luke Sergott from Barclays. Luke Sergott: Just a follow-up on Patrick's question on the capacity expansion. Can you give us an idea of how big your single-use business is now? And then what we should expect from an incremental sales perspective over the next couple of years as those -- as that business comes online and that capacity starts filling out? Michael Stubblefield: That part of our business is in probably 20% to 30% of our total bioproduction platform. And how it's been growing pre-pandemic north of 20%. And obviously, we're seeing tailwinds on top of that this year. But no reason why that type of growth rate won't persist for at least through the midterm here. Luke Sergott: Okay. That's helpful. And then lastly, on Ritter, I know it has strong diagnostic exposure, precision manufacturing, that seems right down the middle for biopharma. Give us a sense of your early strategy here in expanding this customer base. And again, like the incremental opportunity as you guys see it over those first couple of years post close. Michael Stubblefield: We're really excited obviously about the opportunity to bring these manufacturing capabilities into our portfolio. It really fits in the sweet spot here of our consumables offering to our automated lab workflows across a number of end markets. You mentioned biopharma. These products are used extensively in the clinical trial workflows as well as in drug discovery. And when you look at our customer set there, we're excited about the ability to expand the offering that Ritter has beyond kind of their core OEM focus that they've had historically. And when you look at kind of the clinical diagnostics exposure that the business has, another area where we've got great customer overlap and great customer exposure here. And we're selling significant content onto these workflows already. And so the products coming in from Ritter are going to be a straight drop into our channel. Our sales associates are excited to be able to add it along with the rest of the content that they provide. And certainly, our customers since the announcement have expressed their excitement for us having this as part of our offering going forward. This is an area that's structurally been constrained, certainly throughout the pandemic, but probably even before that. And having not only the scale and the reach that we'll bring to it, but the ability to accelerate the investments to expand the business over time is going to be an attractive part of the -- with the target here. Operator: Next, we have Dan Leonard from Wells Fargo. Daniel Leonard: A couple one ripping off Jack's question. Could you characterize your COVID diagnostics exposure in terms of how much is lab-based testing versus how much is the point-of-care testing you distribute, just as I think all of us are trying to understand the divergent COVID views out there? Michael Stubblefield: Yes. Dan, thanks for the question. So as we mentioned before, we're going to have offerings that are going to span kind of the 3 major categories of the testing workflow with PCR testing certainly being the most important for us. But we do have significant content on the antigen-based tests that are out there even at the deployment care. As you mentioned, we've been providing content to OEMs in their production of these tests and in kits as well as in distributing the test kits and the tests themselves. And then as we've said from the beginning, we also have, I think, offering for serological testing, which today hasn't had much traction as a workflow. How that plays out longer term is yet to be determined. But today, the preponderance of our exposure will be on PCR and antigen-based testing again. Daniel Leonard: And then my follow-up. Can you offer more color on your outlook for the APAC region? Your strongest region in the quarter, wondering if you foresee any issues with the COVID outbreak in India or anything else worth flagging? Michael Stubblefield: No, it's a good question. We're obviously following the developments in the region pretty closely. And from a citizen perspective, it's probably disturbing to see what's unfolding in India, for example, with the infection rate that we do see there. We see most of the concern is probably centered around India. China continues to be strong. Southeast Asia around Singapore and Korea continue to be pretty strong, particularly from a bioproduction standpoint. We have a significant order book to support all 3 of those regions, and we anticipate continued momentum there. India for us is probably less than a percent of the overall business today for us. So it's a pretty modest impact. And I can imagine the return to kind of pre-pandemic levels for some of the end markets that we serve there being stumbled a bit here, given the outrage that they're experiencing. At the same time though, we're seeing, obviously, very, very strong demand for things like PPE and diagnostic testing solutions, which obviously we're well prepared to provide. So the mix of the business probably unfolds a little bit differently than what we had imagined, but the business continues to run well. But we're following it quite closely. But we would anticipate continued momentum in the region. Thomas Szlosek: Yes. Just to add a little more color there, Dan. The 27% in Q1, I wouldn't take that here. As Michael said, it's going to be strong, but we've kind of got dialed into our numbers just right around double-digit type increase for the year for the region. We had a really strong Q2 last year. They're driven in part by some of the COVID testing that Michael mentioned. And so there's -- there are some comp things that we have to -- that are actually countercyclical to our overall comp for Q2. So I would expect a really strong overall number for the year. But I would just want to temper your enthusiasm based on the Q1 -- the outstanding Q1 results. Operator: We do have another question from the line of Tejas Savant from Morgan Stanley. Tejas Savant: Just one sort of follow-up, Michael, for you, on the vaccine front. I mean, there's growing chatter around the need for boosters and so on. Does the vaccine portion of your COVID forecast still essentially only account for the current order book and any sort of future forecasting? And then second, on a related note, last quarter, you had noticed that the timing of the vaccine ramp is important and if it ramps sooner than your capacity does, you may not be able to capture all that sort of upside that you think you're eligible for. So in light of this recent capacity expansion, et cetera, can you just give us an update on that situation? Michael Stubblefield: Great questions, Tejas. I appreciate you joining the call tonight. From an outlook standpoint, built into the $350 million to $450 million guide there, at this stage, certainly reflects the approvals that are in place as well as the order book that we do have, which is pretty significant. It's continuing to build aggressively in the quarter. And not only do we have strong orders that extend throughout 2021, but we're also starting to now get orders that are investing for delivery in 2022. So I think on that part of the business, we certainly have a good line of sight. But I think it's becoming almost the prevailing wisdom that there will be a need for booster shot this fall to address the various variants, mutations that are out there. And I think you start to see that build into the planning. One of the implications, as you noted, a strong vaccine ramp is just whether or not you have instantaneously enough capacity to support that as well as really robust base business order book. And certainly, one of the things that us as well as our peers in the space have been challenged with as we move through the quarter is the so-called graded order status that comes with the vaccine orders that based on the Department of Defense prioritization protocols require you to place those orders at the front of the line. And so there are certainly instances here where some of the core businesses, the delivery dates have had been -- to get pushed out or adjusted to reflect that. We've had a series of expansions coming online to date, and we have a number of more that are planned throughout the year that will certainly provide relief to some of the balances. But the supply chains across the industry are going to be straining I suspect well into next year. Tejas Savant: Got it. Super helpful, Michael. And one separate follow-up on your remarks earlier on advanced technologies and materials. How are you thinking about the impact of the semiconductor market supply-demand disruption that's underway and are expected to stay with us through '22. Could that essentially potentially be a tailwind for you guys for what you do there with the move to the lower nanometer nodes and so on? Michael Stubblefield: Yes. We like that platform an awful lot. And historically, it's been quite resilient and pretty frothy from a growth perspective. It's quite reasonable for that platform to grow high single digits, double-digit type levels, and it's not often one of the strength of that stage, and we see that in our numbers. The business continues to run . We have great technology and a footprint that allows us to serve the growth from the fabs in Asia as well as is in the U.S. here. So certainly, one of the strengths of the advanced technology part of our business. Operator: There are no further questions at this time. I would like to turn back the call to Mr. Michael Stubblefield for closing remarks. Thank you. Michael Stubblefield: Thank you again for participating in our call today. I wanted to take the opportunity to make you all aware of our intent to host an Analyst and Investor Day on Thursday, September 9. We'll be sharing more details, including registration information on that in the coming weeks. But as we close here the proceedings, I want to express my continued gratitude for all of the efforts that our associates are putting in around the world, who are living our values every day and helping us live our mission of setting science in motion to create a better world. This team and the resolve and steadfast support of our customers is super-critical to our mission and our success. We're excited about what lies ahead for our business and for Avantor and look forward to updating you when we meet next. Until then, take care and be well, everyone. Thank you. Operator: Ladies and gentlemen, this concludes today's conference call. You may now disconnect. Thank you for participating.
Avantor, Inc. (NYSE:AVTR) Downgraded by Morgan Stanley Amid Financial Challenges
- Morgan Stanley downgraded NYSE:AVTR to an Equal-Weight rating, reflecting concerns over financial performance.
- Avantor's Q1 2025 earnings report showed an adjusted EPS of 23 cents, but revenues fell to $1.58 billion, missing estimates.
- The company's stock experienced a significant drop of 16.6% following the earnings announcement and downgrade.
Avantor, Inc. (NYSE:AVTR) is a global provider of mission-critical products and services to customers in the life sciences and advanced technologies industries. The company operates through various segments, including Laboratory Solutions and Bioscience Production. Avantor faces competition from companies like Thermo Fisher Scientific and Merck KGaA.
On April 29, 2025, Morgan Stanley downgraded Avantor to an Equal-Weight rating, with the stock priced at $12.68. This downgrade reflects a shift from the previous Overweight rating. The downgrade comes amid financial challenges, as highlighted by Avantor's recent earnings report.
Avantor's first-quarter 2025 earnings showed an adjusted EPS of 23 cents, a 4.5% increase from the previous year, aligning with the Zacks Consensus Estimate. However, the company's GAAP EPS remained flat at 9 cents year over year. Despite meeting earnings expectations, Avantor's revenues fell to $1.58 billion, a 5.9% decline from the previous year, missing the Zacks Consensus Estimate by 1.7%.
The revenue decline was influenced by unfavorable foreign currency translation and the divestiture of Avantor's Clinical Services, leading to an organic sales decline of 2.2%. This contributed to a significant 16.6% drop in Avantor's stock by the end of Friday's trading. The Laboratory Solutions segment reported net sales of $1.07 billion, an 8% decrease year over year, with organic sales declining by 2.9%.
Despite these challenges, Avantor's Bioscience Production segment demonstrated strong growth amid ongoing macroeconomic pressures. Currently, AVTR is priced at $12.73, reflecting a slight increase of 0.28% or $0.035. The stock has fluctuated between $12.62 and $12.74 today, with a market capitalization of approximately $8.67 billion and a trading volume of 1,650,299 shares on the NYSE.
Avantor, Inc. (NYSE:AVTR) Downgraded by Morgan Stanley Amid Financial Challenges
- Morgan Stanley downgraded NYSE:AVTR to an Equal-Weight rating, reflecting concerns over financial performance.
- Avantor's Q1 2025 earnings report showed an adjusted EPS of 23 cents, but revenues fell to $1.58 billion, missing estimates.
- The company's stock experienced a significant drop of 16.6% following the earnings announcement and downgrade.
Avantor, Inc. (NYSE:AVTR) is a global provider of mission-critical products and services to customers in the life sciences and advanced technologies industries. The company operates through various segments, including Laboratory Solutions and Bioscience Production. Avantor faces competition from companies like Thermo Fisher Scientific and Merck KGaA.
On April 29, 2025, Morgan Stanley downgraded Avantor to an Equal-Weight rating, with the stock priced at $12.68. This downgrade reflects a shift from the previous Overweight rating. The downgrade comes amid financial challenges, as highlighted by Avantor's recent earnings report.
Avantor's first-quarter 2025 earnings showed an adjusted EPS of 23 cents, a 4.5% increase from the previous year, aligning with the Zacks Consensus Estimate. However, the company's GAAP EPS remained flat at 9 cents year over year. Despite meeting earnings expectations, Avantor's revenues fell to $1.58 billion, a 5.9% decline from the previous year, missing the Zacks Consensus Estimate by 1.7%.
The revenue decline was influenced by unfavorable foreign currency translation and the divestiture of Avantor's Clinical Services, leading to an organic sales decline of 2.2%. This contributed to a significant 16.6% drop in Avantor's stock by the end of Friday's trading. The Laboratory Solutions segment reported net sales of $1.07 billion, an 8% decrease year over year, with organic sales declining by 2.9%.
Despite these challenges, Avantor's Bioscience Production segment demonstrated strong growth amid ongoing macroeconomic pressures. Currently, AVTR is priced at $12.73, reflecting a slight increase of 0.28% or $0.035. The stock has fluctuated between $12.62 and $12.74 today, with a market capitalization of approximately $8.67 billion and a trading volume of 1,650,299 shares on the NYSE.
Avantor, Inc. (NYSE: AVTR) Financial Performance and Outlook
- The consensus price target for Avantor, Inc. (NYSE:AVTR) has slightly decreased over the past year, indicating a modest decline in analyst optimism.
- Avantor's Q3 2024 earnings report showcased a strong financial performance, with earnings of $0.26 per share and net sales of $1.71 billion.
- The company's stable cash flow generation, with an operating cash flow of $244.8 million and a free cash flow of $204 million, highlights its financial stability and potential for shareholder value enhancement.
Avantor, Inc. (NYSE:AVTR) is a well-established company that provides a diverse range of products and services across industries such as biopharma, healthcare, education, and advanced technologies. Founded in 1904 and headquartered in Radnor, Pennsylvania, Avantor has built a strong reputation over the years. The company competes with other major players in the biopharma and healthcare sectors, leveraging its extensive experience and robust business model.
The consensus price target for Avantor's stock has seen a slight decline over the past year. A year ago, the average price target was $26.50, which decreased to $25.50 last quarter and further to $25.25 last month. This trend suggests a slight decrease in analyst optimism. However, analyst Vijay Kumar from Evercore ISI has set a price target of $26, indicating a positive outlook for Avantor's financial performance.
Avantor's recent Q3 2024 earnings report highlights its strong financial performance. The company reported earnings of $0.26 per share, surpassing the Zacks Consensus Estimate of $0.25 per share. This improvement from the previous year's $0.25 per share earnings demonstrates Avantor's ability to deliver consistent results. The company's net sales for the quarter were $1.71 billion, with a net income of $57.8 million and an adjusted EBITDA of $302.5 million.
Avantor's stable cash flow generation is a key strength, with an operating cash flow of $244.8 million and a free cash flow of $204 million reported for Q3 2024. This financial stability allows Avantor to enhance its capital structure and potentially deliver value back to shareholders. The company's leadership position in the biopharma industry and a shifting revenue mix are expected to drive significant margin expansion, further supporting its positive financial outlook.
During Avantor's Q3 2024 earnings conference call, key company leaders discussed their financial results and strategic outlook with analysts from various financial institutions. The call provided insights into Avantor's market position and future prospects, reinforcing the positive sentiment expressed by analysts like Vijay Kumar. Despite the slight downward trend in consensus price targets, Avantor's strong financial performance and strategic initiatives suggest a promising future for the company.
Avantor, Inc. (NYSE: AVTR) Financial Performance and Outlook
- The consensus price target for Avantor, Inc. (NYSE:AVTR) has slightly decreased over the past year, indicating a modest decline in analyst optimism.
- Avantor's Q3 2024 earnings report showcased a strong financial performance, with earnings of $0.26 per share and net sales of $1.71 billion.
- The company's stable cash flow generation, with an operating cash flow of $244.8 million and a free cash flow of $204 million, highlights its financial stability and potential for shareholder value enhancement.
Avantor, Inc. (NYSE:AVTR) is a well-established company that provides a diverse range of products and services across industries such as biopharma, healthcare, education, and advanced technologies. Founded in 1904 and headquartered in Radnor, Pennsylvania, Avantor has built a strong reputation over the years. The company competes with other major players in the biopharma and healthcare sectors, leveraging its extensive experience and robust business model.
The consensus price target for Avantor's stock has seen a slight decline over the past year. A year ago, the average price target was $26.50, which decreased to $25.50 last quarter and further to $25.25 last month. This trend suggests a slight decrease in analyst optimism. However, analyst Vijay Kumar from Evercore ISI has set a price target of $26, indicating a positive outlook for Avantor's financial performance.
Avantor's recent Q3 2024 earnings report highlights its strong financial performance. The company reported earnings of $0.26 per share, surpassing the Zacks Consensus Estimate of $0.25 per share. This improvement from the previous year's $0.25 per share earnings demonstrates Avantor's ability to deliver consistent results. The company's net sales for the quarter were $1.71 billion, with a net income of $57.8 million and an adjusted EBITDA of $302.5 million.
Avantor's stable cash flow generation is a key strength, with an operating cash flow of $244.8 million and a free cash flow of $204 million reported for Q3 2024. This financial stability allows Avantor to enhance its capital structure and potentially deliver value back to shareholders. The company's leadership position in the biopharma industry and a shifting revenue mix are expected to drive significant margin expansion, further supporting its positive financial outlook.
During Avantor's Q3 2024 earnings conference call, key company leaders discussed their financial results and strategic outlook with analysts from various financial institutions. The call provided insights into Avantor's market position and future prospects, reinforcing the positive sentiment expressed by analysts like Vijay Kumar. Despite the slight downward trend in consensus price targets, Avantor's strong financial performance and strategic initiatives suggest a promising future for the company.
Avantor, Inc. Reports Q1 2024 Financial Results - Key Highlights
Avantor, Inc. (NYSE: AVTR) Financial Performance in Q1 2024
Avantor, Inc. (NYSE: AVTR), a key player in the life sciences and advanced technology sectors, recently unveiled its financial results for the first quarter of 2024, which ended on March 31. The company's net sales amounted to $1.68 billion during this period, reflecting a 5.6% decrease from the previous year, with an organic sales decline of 6.3%. This downturn in sales indicates a challenging environment for Avantor, as it navigates through the complexities of its market. Despite these hurdles, Avantor managed to secure a net income of $60 million, showcasing its ability to maintain profitability amidst declining sales.
The company's financial health can further be assessed through its Adjusted EBITDA, which stood at $283 million. This metric is crucial as it provides insight into the company's operational profitability by excluding non-operating expenses such as interest, taxes, depreciation, and amortization. This figure, coupled with a net income of $60 million, suggests that Avantor is effectively managing its operational costs and generating a healthy profit margin. Additionally, Avantor reported a diluted GAAP Earnings Per Share (EPS) of $0.09 and an adjusted EPS of $0.22, which adjusts for one-time gains and costs, offering a clearer picture of the company's earnings from its core operations.
The company's liquidity and financial flexibility are highlighted by its operating cash flow of $142 million and a free cash flow of $107 million for the quarter. Operating cash flow is a critical indicator of a company's ability to generate cash from its core business activities, while free cash flow represents the cash a company can generate after accounting for capital expenditures. These figures are essential for investors as they provide insights into the company's ability to fund operations, invest in growth opportunities, and return value to shareholders.
In the stock market, Avantor's performance has been noteworthy, with its shares reaching a high of $24.43 in today's trading on the NYSE. This market response could be attributed to investors' reactions to the company's financial results and its ability to navigate through industry challenges. The stock price movement is an important indicator of market sentiment and the perceived value of the company among investors. Despite the reported decline in sales and organic growth, Avantor's ability to maintain profitability and generate significant cash flow appears to have positively influenced investor confidence, as reflected in the stock's performance on the trading day.
