Avantor, Inc. Q4 FY2024 earnings call

• Q4 had low single-digit organic growth for the enterprise, with bioprocessing delivering high single-digit organic growth for the fourth consecutive quarter. - Launched new services leveraging digital tools and AI, new Masterflex Miniflex Panel-Mount pumps, and signed third-party supplier agreements. - Completed a state-of-the-art solutions manufacturing facility in Gliwice, Poland, and leveraged automation at a distribution center. - Capital allocation focused on de-leveraging, with $1.3 billion of debt paid down in 2024, reducing net leverage to 3.2 times. - Entering 2025 with focus on innovation-driven growth, margin expansion, and de-leveraging.

Laboratory Solutions: Q4 revenue was $1.13 billion, with a 1% organic decline versus prior year. Full-year 2024 revenue was $4.61 billion, a 2% organic decline vs 2023. Adjusted operating income for Q4 was $147 million with a 13.1% margin; full-year adjusted operating income was $598 million with a 13% margin. Bioscience Production: Q4 revenue was $561 million, with 4% organic growth versus prior year. Bioprocessing within this segment had high single-digit growth. Adjusted operating income for Q4 was $149 million with a 26.6% margin.

• 2025 organic revenue growth expected to be 1%-3% (reported revenue decline -3% to -1% due to clinical services divestiture and FX). - Lab solutions expected to have low single-digit organic growth, bioscience production mid-single digit; bioprocessing mid-to-high single digit. - Adjusted EBITDA margins expected to be approximately 18%-19%. - Adjusted EPS range $1.02-$1.10. - Free cash flow expected to be $650M-$700M prior to one-time cash expenses.

• Macro-economic uncertainties. - Policy changes (e.g., NIH funding, new administration impacts) could impact end markets. - Seasonal and end-market recovery challenges.

Q: Vijay Kumar asked about bioprocessing order trends and guidance assumptions.

A: Michael Stubblefield responded that there was no significant pull forward, underlying market fundamentals are strong, and the order book sets up for sustained recovery.

Q: Michael Ryskin asked about margins and cost savings.

A: Brent Jones responded that the margin range was due to round numbers and potential for better conversion at top-end revenue, and cost savings are being executed against opportunities.

Q: Daniel Brennan asked about lab business performance and 2025 guidance.

A: Michael Stubblefield responded that lab performance was in-line with expectations, highlighting resiliency and margin expansion.

Q: Rachel Vatnsdal asked about policy risk and customer behavior.

A: Michael Stubblefield responded that it's early days with the new administration, modest exposure to NIH, and good science continues to get funded.

Q: Unidentified Analyst asked about bioscience resurgence impact on margins.

A: Michael Stubblefield responded that resurgence would improve margin conversion due to fixed costs and better absorption.

Q: Tycho Peterson asked about academic government performance and bioprocessing market growth.

A: Michael Stubblefield responded that academic education was a bright spot with sustained commercial intensity, and bioprocessing is expected to grow gradually with strong momentum.

Q: Luke Sergott asked about year setup and visibility.

A: Michael Stubblefield responded about phasing of revenue and normal contributions from price in lab business.

Q: Patrick Donnelly asked about advanced technologies and margin impact.

A: Michael Stubblefield responded that semi is a small part, stable sequentially, and contemplated no recovery in 2025.

Q: Tejas Savant asked about FX impact, bioprocessing steady state, and M&A.

A: Brent Jones responded on FX modeling impact, Michael Stubblefield confirmed bioprocessing double-digit growth potential, and M&A remains part of playbook with focus on de-leveraging.

Q: Conor McNamara asked about third-party business agreements.

A: Michael Stubblefield responded that new agreements are part of innovation portfolio, contributing to low single-digit growth expectation in lab business.

Q: Ivy Ma asked about large pharma vs emerging biotech customer cohorts.

A: Michael Stubblefield responded that large pharma is returning to growth, while biotech activity is bifurcated with some established biotechs doing well.

Q: Brandon Couillard asked about first quarter selling days and impact.

A: Michael Stubblefield responded that Q1 has fewer selling days, but lab is expected to be stable.

Q: Jack Meehan asked about interest expense and education market.

A: Brent Jones responded on interest expense accounting, and Michael Stubblefield responded that education market had seasonal factors but higher ed is a bright spot with sustained commercial intensity.