Hello, and thank you for standing by, and welcome to the Avantor to Acquire Ritter Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during this session, you will need to press star one on your telephone keypad. If you require any further assistance, please press star zero. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Mr. Michael Stubblefield, President and CEO. Please go ahead. Thank you, and good morning, everyone. Thanks for joining us on short notice. We're really excited to be here to discuss our acquisition of Ritter GmbH and its affiliates. They're a fast-growing technology leader in high-precision consumables for liquid handling, automated analysis, and clinical studies. Thomas A. Szlosek, our CFO, is joining me on the call today, and following our prepared remarks, we'd be glad to take your questions. As we get started here on slide two, I need to remind you that we'll be providing forward-looking statements which reflect our current views but are not guarantees of future performance. I also need to remind you that this presentation may contain certain financial measures which are not prepared in accordance with U.S. GAAP principles, and a reconciliation of Avantor non-GAAP measures can be found at the back of the deck that was posted on our website. You're encouraged to read the rest of our standard disclaimer. Let's turn now to slide three. As we've noted in prior presentations, M&A offers opportunities to accelerate our organic growth, enhance our portfolio of proprietary offerings, and ultimately provide more comprehensive workflow-driven solutions for our customers. In that context, Ritter's high-precision consumables platform is an excellent strategic fit with Avantor, as it addresses all these dimensions in applications and end markets that we know well. Additionally, our combined businesses share similar characteristics, including a highly recurring, specification-driven revenue profile. Ritter is the fastest-growing manufacturer of high-quality robotic and liquid handling consumables, including conductive tips engineered to exacting standards. These mission-critical consumables are used in a variety of molecular screening and diagnostic applications, including real-time PCR, non-molecular assays such as immunoassays, emerging high-throughput IVD technologies, including Next-Generation Sequencing, and as part of drug discovery and clinical trial testing in pharma and biotech applications. Collectively, these applications represent a nearly $7 billion addressable market with attractive high single-digit long-term growth potential. Ritter's high-precision manufacturing footprint includes 40,000 sq m of specialized production space and 6,000 sq m of ISO Class 8 clean rooms and provides significant capacity for continued growth. The bulk of Ritter's current business is focused on serving diagnostic system providers and liquid handling OEMs. The geographic and commercial reach of Avantor's leading global channel and deep customer access will substantially enhance its revenue potential and provide broad aftermarket opportunities. This combination will significantly expand Avantor's proprietary offering to the biopharma and healthcare end markets, and we anticipate that it will enhance our growth and margin profile. Likewise, we expect that the accretive growth and margin profile from Ritter will further contribute to the value generated for our shareholders. I'm moving now to slide four. Similar to Avantor, Ritter serves highly regulated, specification-driven applications and relies on a collaboration-based innovation model to serve its exacting customer base. Headquartered outside of Munich in the Bavaria region of Germany, Ritter has a state-of-the-art, fully automated manufacturing complex, including inspection and packaging, that is ISO certified from start to finish. Importantly, the facilities have extensive capacity to support future growth. The company's innovative approach to product and process engineering has been key to its success since its founding in 1965. Ritter has redefined lab consumable manufacturing with its state-of-the-art quality management systems and in-house IVD applications lab for product testing. Similar to Avantor, collaboration and customer centricity are also paramount to its success, and Ritter's in-house testing facilitates the product design and customer qualification processes. I'll now turn the call over to Thomas to cover the financial parameters of this transaction. Thank you, Michael. Slide five outlines Ritter's financial profile and the key parameters of this transaction. Ritter will generate approximately EUR 225 million in revenues in 2021, with contribution margins that are very similar to the proprietary offerings that we have in the Avantor portfolio. Upon closure, the transaction is expected to be immediately accretive to adjusted earnings per share. We'll acquire Ritter in an all-cash transaction with an upfront equity purchase price of approximately EUR 890 million, subject to final adjustment at closing, and up to EUR 300 million in contingent payments over the next three years based on the achievement of certain business performance milestones. The transaction is expected to be completed in the third quarter of 2021 and is subject to customary closing conditions, including receipt of applicable regulatory approvals in Germany and in Austria. We expect to fund the acquisition with a combination of cash on hand and committed debt financing. Recall that our leverage to start this year was four times adjusted EBITDA. By the end of the year, based on the continued strong cash generation of the core Avantor business, which will be further enhanced by Ritter's strong cash flow, we anticipate that our leverage will be roughly three and a half times adjusted EBITDA. The acquisition is expected to deliver a low double-digit return on invested capital by year five. This concludes our prepared remarks. At this point, Michael and I will be happy to take your questions. Okay, thank you. Again, as a reminder, if anybody would like to ask a question, please press star one on your telephone keypad. Your first question comes from Tycho Peterson from JPMorgan. Your line is open. Hey, good morning. Congrats on the deal. I know you guys have been looking. Can you just talk a little bit more, Michael, about customer mix here? What percentage are diagnostic service providers, any customer concentration issues, and then maybe where do you see the greatest revenue synergies across the portfolio? Yeah. Thanks, Tycho, for joining us this morning. Appreciate the support, clearly. As I mentioned in my prepared remarks, it's a big addressable market opportunity here, nearly $7 billion, and historically, Ritter has reached that space primarily through an OEM focus. They're going to be partnered with all of the large OEMs in this space, who are going to be broadly represented across the various application areas. I think the piece we're probably most excited about here is the opportunity to leverage our customer channel and our deep customer relationships in these core workflows. These are spaces we know well. We have a lot of content already in these workflows. We're calling on the end customers in most cases. From a synergy standpoint, I think we're going to have an opportunity here to significantly extend the reach of this business, firstly geographically, especially into the Americas and Asia, and then more specifically into our biopharma and healthcare customer bases. This is a great fit for our existing business, Tycho. Okay. I know you talked about accretion this year. Are there any kind of cost synergy targets you could put out there? Yeah, Tycho, this is Thomas. Good morning. Hi. Yeah, it will be immediately accretive to 2021, modest adjusted EPS impact. In terms of synergies, the cost synergies are relatively modest. We do have some opportunities from a back office perspective, but the bulk of the benefits will be on the aspects Michael talked about, the commercial synergies that we've done a lot of homework on and are quite confident. Okay. Last one from me. Is it 100% consumables? It's all recurring, or is there any kind of equipment in the mix here? You're right, Tycho. It's 100% consumable. Okay. Thank you. Congrats. Thank you. Your next question will come from Jack Meehan from Nephron Research. Your line is open. Thanks. Good morning, and congrats as well. Michael, this is the first big deal you've done since the merger of VWR and Avantor. I was wondering if you'd just give us a little bit more color on how you went about sourcing the deal and diligencing it and just some of the background around how it came together. Yeah, thanks Jack. That's a great question. As we've been saying now for quite some time, we have been very active in first building the M&A capability or rebuilding the M&A capability, post the integration of VWR. We've had a dedicated team working on our pipeline for well over a year. We've indicated before that we've been active in a number of deals, and clearly this is the first one that we've concluded. It's consistent with the spaces that we've articulated before that we were looking for assets in. This one fits squarely in our life science workflows within the lab, which is a core part of our business. As part of the work we did in that vertical, looking for life science-oriented businesses on workflows that we knew well, this asset came out of that work. Obviously, given our presence in Europe and specifically in Germany, it's a business that we know well historically. Great. Just from an opportunity standpoint, I would tell you that this particular space is very well known to our leadership team. You might recognize the backgrounds of, for example, our head of our European and Americas business and Lab BU, Frederic Vanderhaegen. He comes from this space, has a background in this area, and the manufacturing technologies that are practiced here are also very well known to many of us here in the business, including myself. It's just a great fit from an end market standpoint. We talked about the similarity in the business characteristics. It's in workflows that we know extremely well, already have content in, and has a financial profile that ticks every one of the boxes that we've laid out from an algorithm standpoint, accretive to growth, accretive to margins, high return on invested capital, and certainly rapid deleveraging. This one for us checked all the boxes, and we're excited to get it to this point. Great. On that point, could you give us some color around what you think the ongoing growth profile of the business is going to look like? Off that, how much is the exposure to Europe today? It definitely seems like there's a lot of channel synergy potential here, pushing into Americas and Asia. What's the exposure to Europe today? I think it's fair to say, Jack, that most of the revenue is coming out of Europe today. That's not to say that the OEMs aren't distributing the products more broadly than that. Certainly the core relationships here are coming out of the European base of this particular business. From a growth standpoint, as I mentioned in my prepared remarks, when you look at the end market applications here, whether it's diagnostic or screening activities, molecular or non-molecular assays or all the various IVD technologies that would leverage these products, and importantly for us, the drug discovery and clinical trial activities. You're talking about (AS 7) applications that comprise a pretty big opportunity, nearly $7 billion. We see the long-term growth characteristics on this being in that high single digits level. It'll probably run a little hotter than that here in the short term, just given some of the molecular assays for COVID testing that would be driving a bit of excess demand here out of the gates here. Long term, we think about this as a high single-digit grower. Great. Thank you, guys. Appreciate it. Your next question will come from Vijay Kumar from Evercore. Your line is open. Hey, guys. Thanks for taking my question. A couple of financial questions from my side. Thomas, you mentioned modest EPS accretion. I'm assuming incremental data for around $700 million, perhaps low to mid-single EPS accretion for next year. Does that seem reasonable to you guys? Yeah, that's fair. Just to be clear, Vijay, you said low to mid-single digit percentage-wise accretion in EPS? Yes, correct. Percentage. Yeah. That's correct. Great. Michael one for you. You mentioned exposure for diagnostics off the $225 million projected revenues for fiscal 2021. What is that? COVID related? What is base revenues? The CAGR here over the five years, is this a high single-digit CAGR, or should we be assuming perhaps a double-digit CAGR? Yeah. Maybe just to clarify, Vijay, on the revenue here, just to make sure we're all aligned on the currency here. The number we quoted there in the prepared remarks was euros. A base revenue for this year of, call it EUR 225 million, just under $300 million on a USD basis. From a kind of end market split of that revenue, I think it's important to recognize that COVID is probably, as we look at it, roughly 10% of the market today. Given the broad exposure of this business through the OEMs, I think it's a fair assumption that the exposure that we have today to the end market is going to reflect the relative size of each of these application areas. When you look at the other 90% of the market that's non-COVID related, I think we see those as high single-digit growers. Certainly to your point, when you add kind of the frothiness of the COVID piece here in the short term, the math may indeed work out that you may do a bit better than that in this period, just given the near-term impact of COVID. Particularly given our focus, at least out of the gates in Europe, and the testing trends that we do see there. I think long term, the right way to model this, Vijay, would be high single digits. That's it. Thanks, guys. The next question will come from Derik de Bruin from Bank of America. Your line is open. Hi. Hello. Good morning. This is Juan Avendano on behalf of Derik. Congratulations on the deal. My first question is, can you remind us what the margin profile for proprietary products is, given that I believe you said at the beginning that the Ritter margin profile was somewhat similar to that? Yeah, thanks. Good morning. You look at the overall Avantor 50% gross margins, we're generally low 30%s, 32%, 33%. We look at the spread of the products that make that up, certainly the proprietary products that we have are much higher than that. North of 50% gross margins in a lot of cases. Certainly the products in the portfolio at Ritter fit that profile as well from a proprietary perspective. Got it. Thank you. Appreciate it. One of the things that you called out in the press release was the state-of-the-art manufacturing facilities that Ritter has. Do you foresee any opportunities to Well, first of all is how would you compare that to your own internal manufacturing capabilities for similar consumables? Do you see an opportunity to achieve cost synergies or cost efficiencies by shifting the manufacturing location of several parts of your portfolio to where they could be more efficiently manufactured? Yeah, Juan, thanks for the question. It's Michael. When you look at the manufacturing technologies that are in play here, I think one of the things we're excited about is the opportunity to establish, this as a bit of a center of excellence for us, and would intend on building our consumables platform around the capabilities that we're acquiring here. Today, we would not have these technologies in our portfolio or at any of our other sites. What I would tell you is, this manufacturing is done in clean rooms, and when you look at some of our other single-use businesses that we have and assets, I think there's certainly an opportunity for us to expand the footprint over time around the world, to bring these technologies closer to the end markets. We'll certainly be looking to do that. This particular business, similar to our other proprietary technologies, operates at the highest levels of quality, and the precision here can't be underestimated. These are really exacting specifications. In reality, there's only a very small handful of manufacturers around the world that can meet these type of requirements. When you look at the level of automation and robotics that are deployed here, both from a manufacturing standpoint as well as from a product testing perspective, we're thrilled to be building our consumables manufacturing footprint around these assets. Thank you. I appreciate the insights. Congrats on the deal once again. Thanks, Juan. Appreciate it. The next question comes from Douglas Schenkel from Cowen. Your line is open. Good morning, everybody. Good morning. My first question is: Was there a portion of Ritter's revenue that went through the existing Avantor VWR channel? And if so, can you quantify and speak to how that leads to almost like an arbitrage situation in terms of immediate margin improvement on existing sales? Yeah, great question. Very little to almost no revenue came through the Avantor VWR channel, Douglas. Okay. Second one is, especially in the market we're in, it looks like a pretty reasonably priced deal on a revenue multiple basis. Can you speak to valuation on an EBITDA basis? Sure. Thanks, Douglas. Obviously, the earn-out will come into play here when you consider the final EBITDA. I think when you look at the way we've negotiated the base case and what we've modeled, it certainly would be a bit less than what we've traded at. You could think of it as something that's probably less than 10x on an EBITDA multiple basis given the strength of this portfolio from a margin perspective, and the strength of the margins themselves. Okay. That's on a 2021 base or a one-year forward basis below 10x or on a trailing basis, huh? Yeah. Okay. Both. Okay. Very last one, cleanup. I can't remember if it's in the deck or in the press release, I think you said that the purchase price doesn't include net debt. Presumably, if there was something significant there, you would note that? Yeah, that's right. Just to be perfectly clear, the purchase price reflects debt-like items, and there's a small amount of those. That's baked into the EUR 890 million that we talked about, and there are no other aspects of debt in the business. Okay. All right. That's great. Very helpful, and congrats again. Thank you. Your next question will come from Dan Brennan from UBS. Your line is open. Great. Thanks for taking the questions, guys. Just on the growth side, company's obviously been around for 50 years. Just wondering on the high single-digit core growth outlook that you're pointing to, can you give us a little sense, is this what the business has been growing at, say, if you look back over the last five or so years ex-COVID? Related to that, you talked about, seems like fairly could be material synergies as you move into new geographies. I'm just wondering if you can help us think through what level of synergies are kind of baked in to get to the high single digits. Great questions. When you look at the applications that drive the core products in this portfolio, most of those are associated with technologies where the growth has really started to materialize in a meaningful way here over the last call it 5- 10 years when you look at some of these, whether the PCR-related workflows, and more recently, looking at the pickup of things like Next-Generation Sequencing, CRISPR technologies, and such. That are driving this as well as the drug discovery workflows, particularly for biologics. I would say, yeah, the business has been around for a long time. The core life science part of this business, I would say, has really become prominent, like many other companies with technologies that apply in these spaces, has really become prominent over the last 5- 10 years or so. Then from a synergy standpoint, as I've indicated, given the relatively low level of employee count, as well as the fact that we intend to build around this footprint from a manufacturing standpoint, the cost synergies are modest. The opportunity here really is to leverage our channel, and as you suggest, particularly geographically, given our strength in the Americas, for example, and the fact that these solutions would be new to our offering. They're going to fit really nicely alongside the rest of our portfolio in workflows that we already have credibility with and customers who we have deep relationships with. We think that there is a great fit here with our business and our channel specifically, and would anticipate driving significant commercial synergies going forward here. Great. Just maybe in terms of their relative share, obviously they have a lot of different products that we could see on the website. Any way to characterize their competitive positioning, maybe across some of the product lines or just who some of the key competitors are, just so we can kind of understand where they fit? Yeah. Great. I think there's probably a couple of product areas that I'd focus your attention on. There's a broader portfolio here, and we will likely expand that as well as we think about leveraging this capacity and these capabilities for our broader offering. If you look at where their strength lies, think about conductive robotic tips, for example. Think about some of the microplates, consumables that are used alongside these tips and things like PCR, for example. Those product categories probably drive the bulk of the revenue here that would be of significance to us. From a competitive landscape perspective, going back to my remarks earlier about the high precision and the exacting standards, we're positioned alongside a small handful, and certainly less than five, of players that have these capabilities. They're names that you would know well in the tools space. From a share standpoint, we probably look at it best just from a share capacity perspective. We're going to have as much capacity for these products as anybody out there. I think one of the things that we were excited about is structurally, this market is extremely short today, given the kind of the new demand that's come in from COVID. Ritter has done a really nice job leveraging their in-house molding design capabilities and line capabilities to position capacity here and structurally position them here for growth over the long term. We'll be one of the leaders, if not the leader in this space. Maybe just one final quick cleanup. Assumed interest expense that we should be plugging in on the debt that's going to be raised, and then was this deal competitive? Thank you, and congrats. Yeah, good question. In terms of interest, we'll be financing it with Term Loan Bs. Pricing will be similar to what's in our portfolio today. It'll be a EUR-denominated transaction given where the asset's located. You can look at some of the rates that we've had. The Term Loan Bs in the more recent transactions are pretty reflective of what we would expect. We'll be going to market as we get closer to the closing date. In terms of the competitiveness, I won't speak to all the details, but yeah, we were not the only one at the table. Great. Thank you. Your next question will come from Tejas Savant from Morgan Stanley. Your line is open. Hey, guys. This is Edmund with Tejas. Congratulations on the deal, and thanks for the time for the questions. I think to start off, can you kind of give me a sense of what this will mean for your proprietary offering as a percent of total revenue going forward, given that their contribution will be towards the proprietary offerings in Avantor? Thanks for the question, joining our call today. As we've talked about broadly in previous calls, between our proprietary materials and consumables together with the proprietary content in our services offering as well as in our equipment and instrument offering, for context, a little over 50% of our revenue today is we would consider proprietary and would have margins that would kind of track the parameters that Thomas outlined in one of the earlier questions. 100% of this content that we're acquiring here, so just under $300 million in revenue this year, will be additive to that algorithm. I don't have the math in front of me, but it'd be fair for you to take all of the revenue here and add it to the proprietary content in our business. Got it. That's very helpful. From a capacity and space standpoint, it sounds like there's sufficient space here and sufficient capacity, but it also sounds like you guys plan on investing additional money here to grow out its capabilities. Can you give us a sense of what sort of investments or CapEx examples you guys are looking at for these facilities? Yeah, maybe one correction there. There isn't enough capacity in the market today. The market is structurally short. Ritter has invested ahead of the demand here and would be, one, if not the only player in the market today with capacity to serve some of these incremental demands, especially associated with COVID. I made a remark earlier about one of the things we really like about this business is just how similar the business characteristics are to our core proprietary business model in that it's high precision, it's high quality, it operates in highly regulated spaces. It's specification driven. To your question, it's also CapEx light. We talk a lot about our CapEx requirements kind of being 1%- 2% of revenue. We're going to continue to be able to invest ahead of growth here in this business and not change our CapEx model meaningfully here. It's going to fit the mold of how we invest in our businesses that we have today, and from that standpoint it's going to be a great platform for us to build off of as we serve a pretty attractive space going forward. Great. Thank you. That's very helpful. One final question for me. Now that this transaction is placed, how are you guys thinking about M&A going forward? Yeah. Thomas walked through kind of the leverage metrics. We'll be covering our first quarter results here in a couple of weeks. I think suffice it to say, we're excited to have that conversation with you, and I think you'll see the continued momentum in cash generation and earnings of the business. We entered the year at about four times adjusted EBITDA leverage. In the deck here, we're signaling that we would anticipate ending the year net of this transaction at exiting somewhere plus or minus three and a half times. We're going to have more capacity ending the year than we started. We'll continue to execute our playbook here. We'll continue to be focused on the areas that we've outlined to you before, bioproduction, some of these high-growth workflows in the lab similar to this one, our services area, and certainly things that would expand our geographic presence. We'll continue to stay active. M&A is not something you want to get into turning on and off. This will keep us busy here for the next number of months. I think it's important to recognize that the strength of the core business enables rapid deleveraging. This will only accelerate that. In fact, we'll have more capacity for M&A next year than we did this year. Great. That's very helpful. Thank you, guys. This will bring us to the end of our Q&A session for today. I turn the call back over to Michael Stubblefield for closing remarks. Yeah. Thank you, operator, and thank you all for joining. Recognize that it can be a bit disruptive to do these things on short notice, but appreciate your support. Acquiring Ritter is definitely going to strengthen Avantor's proprietary offering for diagnostic and drug discovery workflows and will certainly enable the scientific breakthroughs that advance our mission here at Avantor, setting science in motion to create a better world. We're super excited about this transaction and the opportunity to create value for our customers as well as our shareholders. Thanks again for joining us, and we certainly look forward to speaking with you during our first quarter earnings call here in a couple of weeks. Until then, have a great day and be well, everyone. Thank you, everyone. This will conclude today's conference call. You may now disconnect.