Avantor, Inc. (NYSE: AVTR), a leading global provider of mission critical products and services to customers in the life sciences and advanced technologies & applied materials industries, today reported financial results for the quarter ended September 30, 2019.
"We are pleased to report another quarter of good growth, strong cash generation and deleveraging," said Michael Stubblefield, Chief Executive Officer of Avantor. "While a one-time item in the prior-year quarter diluted top line growth by approximately 2%, we achieved mid-single-digit growth in our core business, which continues to reflect the strength of our model. Importantly, biopharma growth in the quarter was strong and overall we exited September with high-single-digit growth."
"Our operating performance continues to benefit from the efficiencies and synergies from the VWR integration, and we remain on track to expand margins approximately 100 basis points in 2019. Additionally, our outstanding cash generation and continued reduction in our interest expense enabled us to lower our leverage another quarter turn to 4.8X," said Stubblefield.
"We have momentum to finish the year strong and are well positioned to enable the innovation and breakthroughs that help our life science customers dramatically improve patient outcomes," Stubblefield concluded.
Third Quarter 2019
For the three months ended September 30, 2019, net sales were $1.504 billion, an increase of 0.6% compared to the third quarter of 2018. Foreign currency translation negatively impacted revenue by 1.8%, and organic revenue growth was 2.4%, reflecting volume growth and improved pricing, offset by discrete, non-recurring volume in the Americas in 2018, which adversely affected global growth in the quarter by approximately 200 basis points.
Adjusted EBITDA decreased 1.6% to $250.8 million but was flat excluding adverse foreign exchange translation impact. Product pricing relative to cost inflation was favorable, and our productivity and VWR integration synergies continued to deliver. These benefits were offset by adverse sales mix and additional growth investments.
Third Quarter 2019 - Segment Results
Management uses Management EBITDA (as highlighted below) to measure and evaluate the internal operating performance of the Company's business segments. Management EBITDA is also our segment reporting profitability measure under generally accepted accounting principles.
Americas
In the Americas, net sales were $918.2 million, up 0.6% from the third quarter of 2018 and up 0.7% on an organic basis, reflecting improved pricing that was partially offset by a one-time item in the prior year, absent which the organic growth in the Americas would have approximated 4%. Sales to biopharma, our largest customer group, grew in the mid-single digits organically, with biopharma production sales up low-double digits.
Management EBITDA was $187.7 million, up 3.2% from the third quarter of 2018, which reflected modest sales growth and stable gross margin. Strong growth in biopharma and SG&A savings, driven primarily by synergies generated from our global restructuring program, was tempered by lower levels of higher-margin healthcare and education & government product sales.
Europe
In Europe, net sales declined slightly to $501.1 million, -0.4% versus the third quarter of 2018, but increased 4.5% on an organic basis due in equal parts to price increases and volume growth. We experienced growth across all of our customer end markets, including high-single-digit growth in biopharma, driven by broad-based strength across strategic customer accounts and new customer wins. Growth was moderated by a low-single-digit decline in capital-related purchases of equipment and instruments.
Management EBITDA was $85.1 million, flat versus the third quarter of 2018. Performance was driven by SG&A savings and favorable product mix due to strong sales of proprietary healthcare materials and contraction in sales of lower-margin equipment & instrumentation. These benefits were substantially offset by unfavorable foreign currency transaction and translation impact.
AMEA
In AMEA, net sales increased 8.1% and were up 8.2% on an organic basis to $84.5 million, driven by volume growth in the biopharma and advanced technologies & applied materials businesses, our two largest end markets in this geographic region. We exited the quarter with over 30% growth for the month of September.
Management EBITDA of $16.9 million, down 10.6%, was favorably impacted by an increase in gross profit, driven by sales growth. However, this improvement was more than offset by a higher investment in customer-facing sales and marketing functions to support the growth in this strategic region and the opening of new supply chain facilities to better serve our customers.
Full-Year 2019 Outlook
The Company expects net sales in the range of $6.02-6.08 million, representing growth of 2.7-3.7%, or 5.0%-6.0% on an organic basis. Adjusted EBITDA is expected to be in the range of $1.025-1.035 billion, or an increase of 8.4-9.4%. Guidance for full-year Adjusted EPS is $0.55-0.58, up 52%-60%.
Our outlook assumes:
- Current foreign exchange rates
- Adjusted shares outstanding of 642.7 million
- Annual effective tax rate of 30-31%
A quantitative reconciliation of adjusted EBITDA and adjusted EPS outlook to the corresponding GAAP information is not provided because the GAAP measures that are excluded from such outlook are difficult to predict and are primarily dependent on future uncertainties. Items with future uncertainties include the timing and cost of future restructuring activities, charges related to the early retirement of debt, changes in tax rates and other non-recurring items.
About Avantor
Avantor is a leading global provider of mission critical products and services to customers in the life sciences and advanced technologies & applied materials industries. We operate in more than 30 countries and deliver an extensive portfolio of products and services. We set science in motion to create a better world.
