Avantor(US:AVTR)2022-10-28 16:59Financial Data and Key Metrics Changes - The reported revenue for Q3 2022 was $1.857 billion, slightly above the guidance provided earlier [11] - Core organic revenue growth was 7.8%, driven by strong performance in biopharma and advanced technologies [7][11] - Adjusted EBITDA was $384 million, reflecting over 100 basis points of margin expansion and approximately 13% growth from the previous year [11][12] - Adjusted earnings per share came in at $0.34, with adjusted net income growing about 9% after adjusting for foreign exchange [13] Business Line Data and Key Metrics Changes - Bioproduction business achieved approximately 30% core organic revenue growth [7][14] - Advanced technologies and applied materials saw double-digit core organic revenue growth [18] - Proprietary materials and consumables offerings also achieved double-digit core organic revenue growth [18] Market Data and Key Metrics Changes - Americas region, representing about 60% of annual global sales, achieved 8.8% core organic revenue growth [15] - Europe, accounting for approximately 35% of annual global sales, achieved 4.8% core organic revenue growth [16] - EMEA region, representing about 5% of annual global sales, grew 15.1% on a core organic basis [16] Company Strategy and Development Direction - The company remains focused on executing its long-term growth strategy, including advancing a robust innovation pipeline and investing in manufacturing capacity [8][9] - Capital allocation strategy prioritizes deleveraging and optimizing the performance of recent acquisitions [20][22] - M&A remains a key part of the long-term strategy, but the company is cautious in the current macro environment [70][74] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the current environment and driving long-term growth despite headwinds from European macro conditions and inventory destocking [9][28] - The company anticipates approximately $400 million in revenue from 2021 acquisitions for the full year [22][26] - Management reiterated a long-term growth target of 4% to 6%, despite short-term challenges [39][60] Other Important Information - The company generated free cash flow exceeding $219 million in the quarter, facilitating over $800 million in net debt reduction [7][13] - Adjusted net leverage declined to 3.6 times EBITDA, down from 4.2 times at the beginning of the year [9][13] - The company plans to retire COVID-related revenue from its projections for 2023, which will impact organic growth [29] Q&A Session Summary Question: Can you elaborate on the European macro and excess inventory? - Management noted that the European business performed well, with mid-single-digit growth, but acknowledged pockets of softening in industrial exposure and laboratory consumables [34][36] Question: What is the outlook for core organic growth in 2023? - Management confirmed that the long-term growth target of 4% to 6% remains intact, despite potential headwinds from COVID and foreign exchange [39] Question: How will pricing and margins be affected in 2023? - Management expressed confidence in passing through inflation costs and maintaining margin expansion, targeting 50 to 100 basis points [45][47] Question: What steps are being taken to improve the performance of recent acquisitions? - Management highlighted organizational changes and a focus on enhancing accountability and operational oversight for recent acquisitions [25][52] Question: What is the expected interest expense for Q4 and 2023? - Management indicated that interest expense for Q4 is expected to remain contained, with a focus on deleveraging to manage rising interest rates [68][69] Question: What would trigger more active M&A in the next 12 months? - Management stated that while M&A remains a priority, the current macro environment and debt market conditions are factors in the timing of future deals [72][74]