Avantor(US:AVTR)2022-04-29 19:59Financial Data and Key Metrics Changes - The company achieved total revenue of $1.95 billion in Q1 2022, representing a 9.2% reported growth rate, with core organic growth at 7.3% [19] - Adjusted EBITDA grew by 16.5%, with an adjusted EBITDA margin expansion of approximately 140 basis points to 21.7% [28] - Adjusted net income increased by approximately 15%, and free cash flow was about $128 million, up 14% from Q1 2021 [29][18] Business Line Data and Key Metrics Changes - Biopharma, which represents over 50% of annual revenue, experienced high single-digit organic growth, including over 20% growth in bioproduction [24] - Advanced technologies and applied materials achieved high single-digit organic revenue growth, driven by proprietary materials for semiconductor manufacturing [27] - Education and government saw a mid-single-digit organic revenue decline, primarily due to reduced COVID-related demand [26] Market Data and Key Metrics Changes - The Americas region, accounting for approximately 60% of annual global sales, achieved 6% organic revenue growth [21] - Europe, representing about 35% of annual sales, achieved 2.6% organic revenue growth, with bioproduction growing almost 30% [22] - EMEA, which represents approximately 5% of annual sales, achieved 11.7% organic revenue growth [23] Company Strategy and Development Direction - The company remains focused on long-term growth strategies, including investments in capacity and infrastructure, with over two dozen manufacturing expansion projects underway [8] - The integration of 2021 acquisitions is progressing well, with expectations to generate around $0.5 billion in revenue for 2022 [30][31] - The company is committed to advancing sustainability through its Science for Goodness platform and plans to release its second sustainability report [41] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in delivering strong growth and robust margin expansion despite macroeconomic challenges, including inflation and geopolitical tensions [16][10] - The company anticipates COVID-related headwinds to be in the range of 2% to 3% for the year, but believes the strength of its core business will offset these impacts [54][13] - The order book is growing, with non-COVID orders now comprising approximately 85% of the total, indicating strong underlying demand [55][24] Other Important Information - The company has ceased all sales to Russia, which historically averaged about $5 million per year, and has no cash or working capital exposure in the region [12] - The company is increasing manufacturing and distribution capacity globally to meet customer demands amid supply chain challenges [15] Q&A Session Summary Question: Can we talk a little bit about the pricing environment? - Management noted that historically, about one-third of growth comes from pricing, but due to inflation, they expect this to shift to two-thirds from pricing [45] Question: Can we get clarity on the performance of your deals? - The company reported $117 million in revenue from acquisitions in Q1, with Masterflex contributing roughly $70 million and Ritter about $50 million [51][48] Question: Are you still expecting to achieve similar growth rates in Q2? - Management confirmed confidence in achieving similar growth rates in Q2 despite tougher comps, supported by strong order books and pricing implementation [60] Question: What is the expected impact from the rising interest rate environment? - The company expects to maintain its original 2022 interest expense estimate of approximately $260 million despite rising rates due to its debt management strategy [34] Question: Can you provide additional color on the size of the backlog on the base business? - The order book for bioproduction continues to trend at roughly a full year's worth of demand, indicating strong underlying demand [64]