Q1 2020 Earnings Call
[music].
After the speaker's remarks, we will have a question and answer session to ask a question. Please press star one on your telephone keypad <unk>.
Withdrawal question press the pound cake, we do ask that you limit yourself to one question and one follow up question.
I'll now turn the call over to Tommy Thomas Vice President Investor Relations Mr. Thomas you May begin the conference.
Thank you operator, and good afternoon, everyone.
Thank you for joining us in today's call.
The speakers today, our Michael Stubblefield, President and Chief Executive Officer, and Tom Sullivan, Executive Vice President and Chief Financial Officer.
The press release and her presentation accompanying this call are available on our Investor website.
I aren't that I want to our sciences.
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A replay of this webcast will also be available on our website. Following this call.
Following our prepared remarks, we will open up the line for your question.
I would like to note that we'll be making forward looking statements within the meaning of the federal Securities law.
Looking statements regarding events or developments that we believe we anticipate may occur in the future.
These forward looking statements are subject to a number of risks and uncertainties, including those set forth in RCC filings.
Actual results may differ materially from any forward looking statements that we make today.
These forward looking statements speak only as of the date that they are made.
We do not assume any obligation to update these forward looking statements, whether as a result of new information future events and developments or otherwise.
This call will include a discussions non-GAAP measures reconciliation of these non-GAAP measures can be found in the appendix to the presentation.
With that I will now turn the call over to Michael.
Thank you told me thanks to all of you for joining us today for our first quarter earnings call.
Tommy Thomas started whether it's in March and we're excited to have him leading via <unk> Investor Relations program Welcome Tommy.
I want to acknowledge the impacted the cobot 19 pandemic has had in the time since our last earnings call.
Our team is doing a terrific job managing the business. Despite the challenges of the current situation and during the call today, we will share details about our efforts to provide the mission critical products and solutions, our customers need while also ensuring the safety and well being of our associates.
I hope that each of you and your families are staying safe during this unprecedented time.
I'm starting on slide three with a brief review of along towards revenue profile.
Our diversified revenue base combined with the customer of nature of our solutions makes our business model very resilient, even in a recessionary environment.
We're very well positioned for continued growth in Europe, and the Americas, and we're investing to expand our capabilities in emerging markets throughout Asia, the middle East in Africa.
More than 85% of our business is recurring and approximately half of our revenue comes from a proprietary branded products and services.
No single customer represents more than 3% of our revenue and approximately two thirds of our revenues in the life Sciences space in attractive end markets, such as Biopharma and health care.
Moving to slide four.
I want to provide some insights into our first quarter business highlights.
That's the cobot 19 pandemic emerged we quickly mobilized global steering committee of cross functional leaders to drive a swift and collaborative response across our business with a focus on safely providing business continuity to our customers.
Throughout the pandemic, our distribution research and manufacturing sites have remained operational.
To protect the health and wellbeing of our associates and he's operations, we're closely monitoring and implementing guidelines from credible health agencies, including the World Health organization centers for disease control and prevention and the European Center for disease prevention and control.
As was taking other precautionary measures.
For the remaining workforce themselves and support personnel, we have implemented work from home processes, which we believe are working very well and the circumstances.
Hi, I'm extremely proud of all our associates around the world, who continue their tireless work serving our customers.
Including many who are working to develop vaccines and treatments Workover 19.
Our broad life Sciences portfolio is being widely used in many cobot 19 related areas.
Including patient testing vaccine and therapy development clinical trial services and ultimately in the production of approved treatments.
We have moved rapidly to enable fast and accurate research results by offering products and protocols and sample collection.
DNA and Arnie extraction, serology and real time Pcr.
Our biopharma customers are aggressively focused on therapy and vaccine research.
And our capabilities on workflows, such as cell culture to PCR protein purification formulation or critical.
With our broad customer access an extensive portfolio of products and solutions of encore is an important partner in the race for a covert 19 cure.
We also advanced key elements of our growth strategy in the first quarter. For example, we launched PROCHIEVE Oh proprietary protein a chromatography resin.
This new product innovation focus is on downstream processing, enabling best in class purification performance for customers working with monoclonal antibodies FC fusion proteins and immuno Guam, an antibody molecules.
Product will expand our addressable market by over $1 billion and enhance our margin profile overtime.
As you May recall, we've invested significant capital to build a world class technology and innovation Center in Bridgewater, New Jersey.
To expand our bio processing capabilities and pro Chiba is one of the first of many new product innovations to come out of this center.
Additionally, our previously announced investments to expand or hydration single use H.P.L.E. sugars and bar repository capacity are proceeding on schedule.
We're excited for the future growth prospects that are investments are enabling even in this challenging environments.
In addition, we remain on track to complete the VW, our synergy program in 2020.
And our of Encore business system continues to gain traction across the enterprise and driving growth and productivity.
Turning to slide five of the presentation I'd like to share a few financial highlights from the quarter.
Organic revenue growth was 4.1% for the period, representing solid growth on our toughest prior period comparison.
Growth was led by high single digit expansion in our Biopharma business, where demand remains robust around the world.
Growth was impacted by academic and government lab closures in Europe, and the Americas late in the quarter as well as by supply chain challenges associated with government imposed border controls related to the pandemic.
Excluding adverse currency impacts adjusted EBITDA on a quarter was up 7% and adjusted earnings per share increased approximately 64% to 17 cents per share.
Double digit revenue growth from our proprietary materials was a key driver of our margin expansion in the quarter.
Cash flow was very strong in the quarter, we generated 241 million of free cash flow, an increase of 284% compared to 29 team.
Combined with our earnings growth. This enabled us to reduce net leveraged to 4.4 times down from 4.6 times at the end of the fourth quarter of 2019.
We remain committed to continued de leveraging as we approach our target leverage range of two to four times EBITDA.
Before turning over to Tom to discuss the financials in more detail.
I want to emphasize the resiliency of our business model.
We are well positioned with a highly recurring revenue base, a broad product offering significant exposure to attractive end markets like biopharma and a strong culture of execution enabled by the of onto our business system.
I'm on towards mission of setting science in motion is more meaningful and relevant now than ever before.
And our Q1 results reflect this resiliency.
With that let me turn it over to Tom.
Thank you Michael and good afternoon, I hope everyone listening to our call is doing well, let's start on slide six we executed well in a challenging environment revenues and profit and free cash flow. We're all strong our manufacturing and assembly plant and distribution centers generally have prioritized were essential stat.
And as Michael indicated have continued to be operational throughout the pandemic.
Vendor supply disruption had been limited, although some category like personal protective equipment, otherwise known as pp remain challenging given the extraordinary demand fueled by the pandemic.
Organic revenue growth was 4.1% and should be considered in the context of the 7.9% growth in the first quarter 2019.
Overall this was a good result against a tough comparison, especially with the additional cobot 19 challenges.
Growth in the quarter was driven by continued momentum in our Biopharma platform that grew high single digits with notable strength in our single use solution life science reagent and personal protective equipment.
This growth was offset by cobot 19, driven closure of academic and government research lab.
<unk> grew 12 school closures high single digit declines in sales equipment and instrumentation and it may a supply chain challenges. We believe that net of all of these factors Cobot 19 contributed approximately 50 to 100 basis points of growth in the quarter.
Looking at growth from a regional perspective, America's which represents approximately 60% of global sales reported 5.4% organic revenue growth driven by the bio pharma and advanced technology and applied materials end markets.
Offset by <unk> health care and lab closures in the academic market as I mentioned.
Europe, which represent approximately 35% of global sales reported 3.3% organic revenue growth driven by the Biopharma and health care end markets offset by decline and the education and advanced technology in applied materials and market.
The main representing approximately 5% of global sales report, a 5.1% organic revenue decline.
This region was impacted the earliest by covert 19, the largest disruption felt in India, where aggressive shutdown mandates, where it acted impacting market demand and supply chain infrastructure revenue growth in advanced technology applied materials was offset by decline in our Biopharma and health care and Mark.
Slide seven shows our organic revenue growth by end market and product group for the quarter I will also touch on what we've seen so far in the month of April.
Biopharma, representing approximately 50% of our revenue experienced high single digit organic revenue growth, which is notable in light of the low teen organic growth in the first quarter of 2019, we continue to see strong growth in our Biopharma production platform, including continued double digit growth of our single use solution.
Moving to health care, which represents approximately 10% of our revenue we grew low single digit.
We had strong growth in clinical and reference laboratory, especially in March as demand for consumable chemical and PPD ramp to support covert 19 testing.
Biomaterials platform performed in line with plant.
Education, and government, representing approximately 15% of our revenue experienced low single digit organic revenue decline as mentioned previously this part of our business with most impacted by the Cobot 19 pandemic as many academic and government research lab and K through 12 schools were forced to close as we move through the quarter.
Advanced technology and applied materials, representing approximately 25% about revenue experienced low single digit organic revenue growth.
We experienced strong growth in defense electronic materials businesses also food and beverage and petrochemicals businesses realized low single digit growth.
These were offset by modest declines in mining and other miscellaneous industrial segment.
By product group proprietary materials in consumable experience.
Low double digit growth with particular strength in the Americas.
Services grew mid single digit driven by continued strong growth of our onsite services model, especially in the Americas and in Europe.
Equipment and instrumentation was down high single digit, reflecting reduced capex investments across our customer base.
In April the bio pharma momentum has continued with strong growth in lab products and Biopharma production also we are actively engaged with our supplier partners and customers to bring cobot 19 related offerings to the market, including diagnostic kit and through a logical solution.
The cobot 19 impacts we experienced in the second half. The March has also continued.
Academic labs closures and curtailment customer capital spend continued to be headwind to revenue growth. Additionally, there were some timing related softness in our health care business as the cobot 19 impact a fewer elective procedures is felt.
Also groping industrial portion of the advanced technologies and applied materials end market has moderated from Q1.
Considering these factors we expect the April net revenue decline to be in the low to mid single digit range given the uncertainty around the intensity and duration of the pandemic. However, we are withdrawing our guidance for the year.
Turning to slide eight let me start with our first quarter adjusted EBITDA, we achieved 7% growth in adjusted EBITDA and 54 basis points reported margin expansion.
As you recall, we were still a private company in the first quarter of 2019 and have since added certain cost to support the public company status post our Q2, IPO without which margins would've expanded by approximately 90 basis point in this first quarter of 2020.
Key drivers of the performance, where volume growth price and favorable mix, including strong growth in proprietary offerings, all partially offset by the impact of growth investments that we continue to make particularly in the EMEA region.
Free cash flow improved from 63 million to 241 million an increase of approximately 284% Unlevered free cash flow was 261 million for the quarter. We had very strong working capital performance, which contributed over 80 million to the increase also lower cash interest and taxes contributed a combined.
50 million to the improvement.
Finally, we reported 64% growth in our adjusted earnings per share for the quarter, primarily reflecting the strong operational performance driven by organic sales growth and margin expansion as well as the ongoing reduction in interest expense from our de leveraging and the improvement in our income tax rate.
Slide nine has our segment results.
We have a minor change in the way we are measuring segment profitability. You may recall that previously we were using management EBITDA as a profitability measure for the segment, which reflected a few more adjustment than the adjusted EBITDA metric, we used to measure profit for the entire enterprise.
Effective January one we have conformed to two and are now using adjusted EBITDA to measure the profitability of the segment and of the entire enterprise.
Well, we have restated the segment results for 2019 for comparability purposes. There is no change to the adjusted EBITDA for the enterprise.
America's reported 170 basis points improvement in adjusted EBITDA.
Drivers include volume growth strong price management relative to Cogs inflation and positive mix driven by a higher proportion of growth and proprietary materials and consumable.
All offsetting modestly higher SGN a car.
Europe reported 40 basis points of improvement in adjusted EBITDA Key drivers include volume growth strong price management relative to Cogs inflation, and lower equipment and instrumentation, all offsetting unfavorable operating expenses driven by foreign exchange.
It May reported 540 basis points decline in adjusted EBITDA impacted by lower sales volumes and higher operating expenses, including investments in research marketing and sales personnel.
On slide 10, we provide a brief summary of our liquidity.
Start it is noteworthy that despite the challenging environment our de leveraging continued in the first quarter, we lowered our leverage to 4.4 times EBITDA. This continues to be a major priority for us.
In January we lowered borrowing cost by 75 basis points on the approximate 1 billion in term loans and in March we lowered borrowing costs by 60 basis points on our accounts receivable securitization program. We also upsize that program by $50 million to $300 million at the same time.
Total liquidity at March 31st was 882 million made up a 346 million in cash 300 million in accounts receivable securitization and the unsecured bank revolver of 250 million.
Both facilities are largely unused as our free cash flow is our primary source of liquidity.
We have no significant debt maturities until 2024, we only have one substantive debt covenants, which is only triggered if we have more than 35% of the revolver drawn. Upon currently there are no borrowings outstanding on the revolver, but in the event. We were a trip this threshold or first lien borrowings would be limited to 7.35.
Times, our EBITDA currently our first lien borrowing or less than three times EBITDA.
To summarize our liquidity and cash flow are strong and we're committed to de leveraging even in these challenging market conditions, our debt maturities and covenants are minimally intrusive and we look forward to future repricing opportunities in our debt portfolio with that I'll hand, it back over to Michael.
Thanks, Tom I'm on slide 11.
We executed well in a challenging environment and our strong revenue and EBITDA growth outstanding cash generation and continued de leveraging reflect the resiliency of our business model.
Challenging times like this highlights the value of our highly recurring revenue base.
Broad mission critical product portfolio, and our exposure to attractive end markets like Biopharma.
Well the uncertainty associated with the current pandemic has caused us to withdraw our previously issued guidance. Our long term growth strategy remains intact and we are steadfast in our commitment to help our customers come about this virus by supporting ongoing initiatives and testing vaccine and therapy development and ultimately the production of approved treatments.
Our mission of setting science in motion to create a better world has never mattered more.
I want to sincerely. Thank you for your interest in investment income on tour and for your ongoing support.
I'll now turn it over to the operator to begin the question and answer portion of our call.
Operator.
Thank you, ladies and gentlemen, if he would like to ask a question at this time. Please press Star then one on your telephone keypad again that star one to come into the question Q.
Just try your question press the pound cake and we do ask that you limit yourself to one question and one follow up question. Thank you. My first question comes from Tyco Peterson JP Morgan.
Okay. Thanks.
Like all set was about manufacturing I think it's a little bit over 10% today can you maybe just talk about some of the investments you're making as we think about monoclonal antibodies scaling up and vaccine production can you just talk about how you feel like you're positioned and the degree to invest MACI, maybe make no. It can meet the going demands of market.
Thanks for the question Tyco good to hear from you.
Thank you haven't about right in terms of exposure while production. Obviously is an important part of our portfolio that is experiencing double digit growth for.
Most of the last couple of years, and we do continue to invest whether that be and infrastructure in the form of.
Our R&D centers that we've been building around the globe. Most recently the inauguration of our New center in Shanghai. We also recently doubled the size of our center in Bridgewater.
We highlighted in the in the press release or the comments there one of the first innovations that came out of that new center in Bridgewater.
Our proprietary chromatography Ah you know resin.
That will expand our.
Vessel markets, but we also continue to invest in your manufacturing capacity and we highlighted a number of those areas and in recent months, whether that be in hydration capacity or.
Single use capacity or.
Things like our equally sugar platform. So we continue to invest ahead of demand to ensure that we cannot meet the robust opportunities that are out there I'd say you know we're we're excited about what were what we're seeing and whether its.
The traditional.
Having said I've been in the pipeline, we're well positioned or the onslaught of new therapies that are in the pipeline to go after a the Coca 19, Barra buyer as well so well positioned tyco to you don't have a lot of growth and success in some of the do modalities whether that be and.
Things like cell and gene therapy. So we continue to scale, our our instruction on capabilities and our presence to be able to to get our material specked into to these platforms going forward.
And then one follow up for Tom on applied Technologies, you noted petrochem up low single digit obviously pricing.
So just curious on your outlook for that part of business, particularly.
Yeah, we will watch it Psycho every every day the.
We get the sales reports is it's.
Yes, pretty modest part of that overall.
Folio I mean is like.
The segment itself, probably 25% of revenues.
But it's a aggregation of.
A number of individually small exposures to various industries.
The chemical.
Oil and gas is one of those.
Like we said, it's it was flattish low single digit kind of continues on that page. The we are seeing a little bit of.
Industrial softness impacting that some of them so that growth rate that we saw a moderating a bit but it is it's not like it's there's there's some sort of a curtailment of a grocer or major major negative.
A news to share so it's.
You know kind of a kind of okay, but.
No not not a growing through the roof as well.
Okay. Thank you.
And our next question is going to come from the line of Derik de Bruin with Bank of America.
Hi, good afternoon.
Yes, there is there could be very worthy.
So a couple of questions I get the first one just to clarify because I had a little bit of cellphone garble here, you said down low to mid single digits in the second quarter correct.
I heard based on what we're saying, yes based on.
What we're seeing in April so it's kind of what we see for April we didn't really comments on where we see the full quarter playing out only.
Just given you know the uncertainty of of the situation that we're.
You are trying to call the quarter, just trying to give you some color on what we've seen through the month of April.
Great. So that was going to be my follow up question to that end is I guess, what can you say in terms of.
Our estimates would put somewhere around 50% of labs.
Close I'm just wondering what your feet on the street had a ground are doing obviously, there's going be can difference between the far relapsing academic labs, just some color on what closures are and.
I guess I guess.
What would need to go.
Is it just mostly duration, how how long closures are the biggest wildcard on how you're seeing the the next couple of quarters play out.
I think Derrick clearly the biggest headwind that that we do see in our business at the moment is research lab closures.
In the academic environment, particularly the University studying and we're seeing everything from complete closure to.
Partial operation too.
Round the clock operation of.
Apps that are working on vaccines are therapies for covered so we've got the full gamut of of activities playing out.
But it does remain the biggest headwind in the business and at least in the current environment with variables as we see them.
Our returns on a more normalized operations in that space.
Well certainly.
It'll be a a tailwind for our business so.
Yeah, I'm, certainly or we don't know when that's going to happen.
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Great and if I can squeeze in one final one.
You know a lot of us lot of us I mean, nobody really hasn't experienced with the legacy of Antwerp business are going into the recession and sort of follow on into Tychos question on.
It is through the sensitivity the overall business too and that as severe economic downturn and just just from your thoughts just because it is a different animal than any of us said, but when you're looking at the old DWR and so we're getting understand of like what's your macro sensitivities are intimately.
Recession environment.
Sure.
I mean, clearly to the situation that we're in now is probably unprecedented I'm not even sure you know, though the financial crisis annoyed zero nine as even a good parallel just given the.
Extreme differences in the dynamics, you know I would say that the we're very well positioned with a very resilient model, 85% or revenue being recurring.
Very broad.
Portfolio good good diversification in both the lab as well as in production and at least in.
The current situation the production environment has held up extremely well.
The value chain for.
Currently approved.
Therapies that we're expecting to continue to run at a high rate obviously with the investments we've made in single use and.
Some or other proprietary technologies, we continue to outgrow the market.
Hi beds.
In the lab you talked about we're seeing some headwinds in the academic assays to a lesser extent in the in the Biopharma Research labs, certainly some of those labs have how scale back activity, but you have.
It was an equal amount that have ramped up activity just to go after whether it's a vaccine on therapy for.
For for Colin So.
Legacy of onto our portfolio. So your question.
It is primarily a production oriented.
Portfolio, where the preponderance of the revenue about platform is specked into the high growth Bioproduction space. So you know.
To be fairly insensitive to.
Economic shock, but I think we're in a much different environment now in the dynamics of what's driving the business billings are probably all agree or a little bit different.
And then numbers weren't public backing.
Numbers weren't public back when we.
About over Standalone, but they held up as well as we W.R. to at least on EBITDA side over that high free cash flow was.
Also pretty strong.
Oh, great. Thanks for that color. Thank you very much.
And then.
Our next question is going to come from the line of VJ Kumar with Evercore ISI.
Hey, guys. Thanks for taking my question and congratulations on a on really a good French there relative to I guess almost a fierce out the sweet had maybe I'm starting on the commentary on April.
I guess.
This does make sense to look at this business and a week on lead comp basis or Rob.
We're all trying to figure out of was April the bottom and should things improve month on month that certainly seems to be the case, where some of the other companies. So what could go wrong from April right. If all of the lapse or close could anything else go wrong, which would cause me to be you know I trained below April so maybe just give us some sense on now.
What happened in April.
And you know maybe plus or minus.
Where we could move from that line.
Sure Vijay Thanks third the question, maybe I'll walk you through each of the for end markets that we serve give you a little bit of color on that until we got a hospice. What's your question so starting with Biopharma, which is roughly 50% of our revenue.
Form remains strong around the world. It's about production a piece of that running high single digits double digits type levels and the research environment is holding up pretty well there is a mix of some labs that are scaled back.
On that or.
Ramping up but overall the biopharma platform, whether it be in Q1 as we saw it into into April continues to be strong.
Health care for US you know well less than 10% on the revenue.
Little bit about mix story here, we have exposure so half of that platform is.
In the.
Clinical diagnostic Bob reference lab type setting and you see a mix of things going on there.
Obviously, some of the traditional clinical diagnostics running a little bit below historical levels and that's.
Primarily being offset by.
The strong ramp in.
Demand for our solutions for covert testing.
The other part of that a platform as our biomaterials.
Form serving.
Pretty wide array of implants.
Devices medical implants, and as I mentioned that platform continues to run at least through the first quarter are pretty high rate.
Somewhat moderated in April due to the postponement of elective surgeries.
So that's a that's a variable that we're watching pretty closely.
I think we've talked about about the academic and government environments in aggregate about 15% of the revenue the academic research lab part of that comprises less than 10% of of overall revenue.
And as I mentioned I think what we're seeing there is in line with what you see being reported publicly.
And then in the advanced technologies applied materials part of the business about 25% of the revenue.
Split across a wide range of both industrial and on industrial applications.
Grew low single digits first quarter, I would say strong momentum in defense semiconductor food and beverage that so that we saw in Q1 kind of carry into into April.
It's moderated sequentially a bit.
In some of the industrial areas as Tom mentioned like like oil and gas.
Whether april is the bottom or not.
Probably speculation on our part to try to call that.
We clearly are watching very closely even on a daily basis, what's going on in these academic research labs and we're in close contact with our customers. We do have a significant presence on site at these last two our services teams and our teams will likely in the labs that are shutdown will likely be.
Some of the first people back in those labs to get them restarted so we're staying close to us.
And fingers crossed that as you.
The the globe gets so dependent mentioned are people will start to see some of that return whether that's in may or June or later, probably been tough call right now VJ.
That's helpful comments, Mike and maybe one for Tom Tom on the cost structure any comments on fixed versus variable as this Q1 was margins for leading strong if I go back to.
Your your original guidance on free cash flow for 50 to 500 for the year.
And given where to Q could potentially for a minute shakeout and if we have to see I'm going to sequential improvements. That's how other companies are looking at the environment. We took who's the bottom and then we improve.
Almost looks like free cash flow almost no dare I say no change so any thoughts on.
Neil cost structure, and <unk> ability to manage piano. Please. Thank you, yes, yes, so first on a on the cost structure VJ.
And we look at fixed versus variable I'd say that where we look at the Cogs I mean, most of that is variable cost by 70% of it as materials.
Probably another 10 is kind of people in overhead I would say another had most of the DNA would be would fall into.
Fixed category, but it's a broadly addressable category is not as like depreciation can't do anything out I mean, there are actions you can take and when you think about.
You know cost containment initiatives I mean, it our focus right now is supporting our customers I mean that an employee safety our top priorities right now and we have plenty to do.
Well, we also had a good track record of cost management I would say.
You know, we're nearing completion, our synergy program.
Yes in fact on a run rate basis in the in the first quarter we achieved.
We crossed the $300 million threshold lives from a run rate basis. So.
In that we had three quarters ago, there continue to drive that but we've we've achieved leased to the bottom.
Part of that.
We're not oblivious to what's going on we're actively monitoring headwinds and you know taking prudent actions. So far the you know there's been just modest demand disruption for us I will look at things like discretionary spending obviously see any.
Yes, it does its own work for you with so many people not not traveling.
What we've taken some other discretionary right is around new hiring and so forth and to the extent action or to the extent the conditions become worsening, we'd obviously have contingency plans in place.
No from a cash perspective.
Don't totally crazy.
With your observations in Q1 was very strong we're up 180 million year over year.
And it really demonstrates the high conversion low capex model that we have.
We had better EBITDA, we had really strong working capital performance with obviously lower interest costs.
As you said you know our guide was 450 to 500 for the year, we've already got to 40 of that.
You can do your own mass and see where you think that takes you.
We've also gotten some benefits we expect to get some benefits from the.
The carriers act, particularly around.
Freeing up some of this interest deductibility that.
We have we been limited to 30% in the past cycles of the 50% that should give us some tailwind as well I don't think we'll spend.
All the Capex that we we hadn't the plan and I think theres, probably at some point and will be an opportunity for for refinancing. So all the Q1 performance and those factors I mentioned I think instinctually you're right.
5500.
Looking out.
Maybe there's an opportunity there but.
We're because were withdrawing guidance.
We're not we're not really going to comment on what where we think thats going well continue to this will continue to receive our attention.
And we're optimistic that.
It is good things turn into so this will be a.
Throughout the what you're referring to.
Really interesting thanks, guys. Thank you.
Thank you. Our next question this kind of come from the line of Doug Schenkel Cowen.
Hey, good afternoon guys.
First off when we when we talked at some point.
I don't know when it was March I know is in March but every week seems like a month. These days so I'm not sure exactly when it was but when we talk.
It seems like the company, we're seeing some activities that looks like stocking at the end of the quarter in hindsight was that the case and if so how how material was that due to carry into April and where it was most pronounced by business area.
Sure. Thanks for the question Doug.
Does seem.
Smartphone, we did see because it doesn't make a while ago.
As Tom mentioned in his script I think as we look at kind of Colgate related Tailwinds, which would include any destocking that incurred in the quarter.
Best weekend.
Bracketed probably in that 50 to 100 basis points range.
I don't think stocking ended up being that big of a factor I think most of what we're seeing is really the meat increased demand whether that be in.
Life Science reagents, or PE support Kobin related testing or development I think the other point to keep in mind. Your most of the labs for example that we support they don't really have.
Significant space.
For for a lot of excess storage.
And in fact, I think that is part of what drives some of the value that we deliver in that they really rely on us to be able to carry the seeking saw can provide.
Timely deliveries and with the model we have set up we're able to do that in more than the burden 70 countries around the world on a same day or our next day basis. So.
I'm sure you know there was some modest stocking in the quarter because captured in that 50 to 100 basis points, but I think now that we think that most of.
The cobot showing that we saw we're demand driven.
Okay Super helpful. Maybe maybe just a couple quick ones and that all I'll get back into the Q.
Believed the vast majority of your diagnostic business and so am I just wanted to make sure that's right and it is.
Pretty clear based on your prepared remarks, but that is a an area that the tailwinds I'm just wondering how how big is that business today and how much of a tailwind is that and then the second thing I wanted to ask was just on a Ami a. on any update in terms of just what you're seeing over the last few weeks, specifically what I'm trying to get out is you commented on supply.
Chain challenges in India I'm, just wondering if that's freed up at all thank you.
Yes, thanks for the questions.
So maybe we'll go in reverse order here, we'll talk about EMEA first.
Obviously, the pandemic hit that region.
First and hardest and.
The regions, 5% of our of our revenues so in the end not a major driver within within the quarter, but.
And we tend to have a little bit different mix of business in.
In the EMEA region relative to Europe, or or the Americas tends to be a bit more production heavy and so you are you see a little bit more lumpiness in the business just owing to the campaign batch.
Timings and schedules of our of our customers and.
We saw that play out pretty much as planned but certainly on the consumables part of the business we did see.
Obviously, some some impacts.
The modest.
There were some supply chain challenges when you think about the logistics environments in India for example.
Just challenges in getting.
Trucks and drivers and things. So it's a complete deliveries was a bit of the challenges as the country move to walk things down pretty aggressively starting in the middle of March as we move into.
April.
I think generally whether you're in China Korea, Singapore, I think we've seen sequential improvement in those markets.
I think even in India, we're starting to see.
Some sequential improvement into.
Insight into April so I think we feel like.
Right.
Like the region is heading into right direction, Yeah, I will I will say the.
The the Lockdown for India is.
May.
Maybe.
Second I think is the.
This is the official official Dave.
When it goes without whenever I've heard recently that Andy.
That could be changing it.
Extending to the ended the month, so who knows more subject to that so the challenges will continue to be there, but I mean it might point.
We are seeing a little bit of.
More upside as a as things start to come together in some of these cobas 19 related.
Areas, whether its testing.
Personal protection equipment.
And other things that they are coming through.
Doug and then back to your first question around.
Diagnostics.
We're going to play that space in a number of different areas.
We have a pretty robust.
Portfolio of of reagents proprietary reagents, they're going to go into.
On an OEM basis, it will be stepped into the various instrument platforms that are out there.
We have a pretty robust infectious disease point of care testing kit business.
Primarily focused on hematology centered.
In the EMEA region, and then maybe a little closer to home here, we have a pretty robust you know offering of.
Sample prep extraction reagents and things to support.
GPCR workflows and.
Other diagnostic work flows both you know.
Non code related as well as.
Cobot related and then you know to supplement that our.
Services platform is going to get pretty heavily involved in a lot of the diagnostic workflows whether that be in.
The custom kidding, but we would do to support.
Sample collection specimen collection transportation.
In fact, we're pretty heavily involved with most of the major labs and facilitating the Colby testing in that regard now and we also have a one of the leading bile repository archiving franchises that's.
Gonna be linked to lot of diagnostic testing that goes on around the world. So Doug we're going to we're going to be.
Both the diagnostic space and number different areas.
Thank you. Our next question is going to come from the line of Dan Brennan CBS.
Great. Thank you. Thanks for taking the question congrats on the quarter I was hoping to go to be more industrial part you business I know you talked about it I think the V. Jays question, maybe you could you elaborate a little bit it looks like that business certainly holding up.
I believe well despite what's going on in the broader economy I Wonder if you can maybe unpack that a little bit and.
Maybe get little a little flavor like how that business is doing.
Yes, thanks for the question that air from you.
You know most of the exposure that we would characterize as an industrial is going to be.
Mapped into the advanced technologies and applied materials portion of our business, which is roughly 25% of the revenue.
Within that.
Part of that is going to be nonindustrial in nature. The way, we play defense away pay semiconductor for example, and then you are going to have a mix of.
Industrial type exposure in various end markets, none of which would be.
By themselves more than a couple of percent of of total revenues. So that's going to pick up things like pet Chem.
Oil and gas for example mining to some extent.
And we are seeing kind of a mix of a performance, though you take the mining business, we have a pretty unique exposure there, particularly for things like gold mining where.
If you looked at the price of gold the demand curve has shifted from maybe being jewelry dominated into more.
Currency.
Revenue.
The flight to safety there.
In a macro crisis.
Propping up.
Pricing and demand in that part of the business.
Oil and gas pet Chem held up generally pretty well in the first quarter. We have seen sequential decline as we moved into April is things like oil price and production of.
Fallen off dramatically in language.
The oil prices.
You don't think high single digit type, but declines there so.
Pretty unique exposure to the space and I think that.
Combined with the diversification allows that part of our business to hold up.
Reasonably well, we weren't expecting significant growth in that part of the business. This year.
If you recall in 2019 that was a bit of a headwind for us most of the year.
Just given some of the industrial weakness around the world, We did see sequential improvement moving into the first quarter and well that's moderated somewhat it's it's not a major had headwind for us at the moment.
Great. Thank you for that was great detail and I was hoping I know obviously, the biopharma biologic production business obviously is.
Kind of the highlights for the company, but.
Just more broadly within that your largest customer base did you talked about research holding a pretty well is it like could you could you give a little more flavor. Besides the bioproduction piece.
Research piece I mean like how much of that business is maybe tied to clinical trials has happened that drag maybe get a little more flavor.
Similarly for your Biopharma business and dies, the different pieces and how it kind of how they didn't Q1 and kind of how you think about the outlook. Thank you sure sure. So as soon as you know biopharma for US is roughly half of the revenue and that's going to be split roughly two thirds.
Focused in.
Biopharma research environments, So laboratory environment.
And then roughly a third of that is going to be focused in in bile production and.
Within the research environment, obviously, we're going to be.
Bringing to bear the full breadth of our of our portfolio whether that be our proprietary materials consumables and third party materials consumables. Our services is going to play a pretty important pardon in those labs will have.
More than 10000 associates embedded in our our customers research labs, either sitting on the bench running experiments or.
Or managing the labs, and then of course in.
Support our customers.
One of the unique aspects of our of our business model and a key.
You know point to understand about our model is that we have fully integrated the business such that we can support our customers in our scientists in the lab.
To support their early phase discovery in process product development, and then scale with them as they move through clinical trials, we have set a pretty robust offering in that space and then ultimately serve their you know commercially approved platforms at scale with a pretty robust offering that allows us to participate in both upstream downs.
Streaming formulation activities in those environments with our.
Well, our GMP portfolio, so we pretty well covered in the space and I would say.
Except for maybe a little bit a pullback in the first quarter in some of the research activities as some of the the labs to pare back there.
Our on site presence.
Well the majority of what we saw in Biopharma was a continuation of the strength that we saw pretty much throughout 2019, which means you're talking about.
High single digit growth in the lab.
Essentially double digit growth in the production environment, and we really see that continuing into April you were well positioned across all the different modalities whether that be.
Vaccines are monoclonal antibodies, obviously cell and gene therapy or emerging environments, we're spending a lot of time in.
And geographically we've got good good coverage good presence of the Cmos.
So.
Pretty important part of our of our business I think we're well positioned as opposed to continue to realize the upside of a pretty attractive end markets.
Great. Thank you Mike.
Thank you. Our next question is going to come from the line at Patrick Donnelley The city.
Great. Thanks, guys.
We think about the April decline and appreciate the color you gave there.
Anyway, changing the breakout I know, it's only 15% how should we be thinking about the instrumentation equipment declined versus kind of up more recurring revenue side during April.
Yeah, you're hitting on I think a pretty important.
Part of the story here Patrick so thanks for the question.
That part of the business.
Really anything that's kind of cap capex.
Driven.
As whether it be in this downturn or in previous downturns as the part of the portfolio that gets hit the hardest as our.
Customers, regardless of end markets, obviously looked.
Optimize cash flow and and squeeze capital investments and so as.
As you look at where the headwinds played out in Q1, it was disproportionately into that category. Fortunately for us, though it's only 15% of our revenue and I think when we talk about the resiliency of our of our portfolio in our model. This is an important driver.
That we have relatively light exposure into that space, so that category down double digits in.
In April so.
Surprise to us.
We would expect to see it at those levels high single digit decline low double digit declines.
So we start to see broader recovery.
But.
Really highlights then the strength of the rest of the portfolio and being consumable driven as being highly relevant to our customers research activities as well as in their production activities.
It makes sense. Thanks, maybe one for Tom just on the debt side I know you've talked in the past I was recently was for Q about the repricing opportunities on debt.
Some things or or maybe cable to little bit for now, but maybe you can you just talk through your when you think theres potential to do that as we get through thrown away or cobot here to get to the other side how much of a priority that is for you guys.
Yeah, I mean I wouldn't be in this job I know exactly when the markets we're going to.
Kind of return to.
The status that we are seeing in early mid first quarter.
But with that said there has been.
Some recovery if you just kind of follow what's going on it in the debt markets, where we participate.
Most of our most of our debt has it trades and just kind of back too.
The the levels that it was trading at not quite all the way back to January but.
Good.
Degree of the way back.
And so.
We are still very interested in in.
Going after and addressing the debt.
There's nothing built into our guidance for 2020, our original guidance.
And so we don't feel like Theres any urgency and in fact, a it really isn't it wouldn't be at our best interest unless a real.
Something very very attractive, which we don't see right now came along I wouldnt wouldn't make any sense do any before.
On October Onest anyways, that's the that's the first time our make whole.
The premiums.
Expire we would have to pay that.
But with that said we are actively monitoring things.
We have weekly discussions with no advisors and banks that no the near the market pretty well.
And your reasonably confident that you know as the year transpires.
No. The original plan of taking action on this would would come into play, but it's going to its going to take awhile for the markets to fully.
We'll get back to a point where.
We can save conference that we know when and the degree of benefit we're going to get.
Great. Thank you Holly.
Holly we're running up on the on the hour so let's take one more question.
Oh right. Our final question then for today will come from the line of Brendan Cool yard with Jefferies.
Thanks for squeezing me in.
Michael you mentioned launching new protein a chromatography resin.
Sort of talk through.
Market strategy their initial conversations with customers and how significant you think that could be kind of over the next three to five years for was pretty consolidated market competitively that type of product.
Thanks for the question Brandon.
As you know innovation, particularly in our proprietary technology portfolio is is an important part of our business model, we have been investing.
Enhance our capabilities around the world and over the last couple of years of.
Opened up chromatography labs in Korea, our New center in Shanghai will be heavily focused on chromatography and our flagship centre in Bridgewater.
Where this technology was was developed starting about three years ago, obviously has.
Well compliment of protein expression, all the way through and so to formulation capabilities. So.
We'll continue to drive a lot of innovation into our.
While production portfolio and this is a great example of that.
Well pretty well penetrated into the chromatography space. This was a gap in the portfolio.
And not having a credible offering into the protein a space and.
Represent represents probably half of the chromatography market and so it really does expand our total addressable market performance is obviously critical.
And enhancing recoveries.
And I think the market is.
Anxious to have alternatives.
To your point to the concentrate in supply basis, there today I think there's value in having.
Independent supply chains for things like ligands and.
Resins in such which which this will provide link the performance as we have tested it in sampled it.
Yes, I would put it at the top of the market and so I think.
There's been a long cycle qualification time on these things as you know well gets.
Lift into the lab market, what we'll see these opportunities immediately it's in the field we have.
Very robust launch plan that was coal provided in the scares RMBS program.
And.
Our sales force is actively sampling and selling.
Calls into the lab space as we speak.
That will scale overtime and as it gets specked into.
New therapies in those become approved we'll start to enjoy.
Higher revenues as those homes become commercial so.
The impact will scale overtime, and we'll obviously continue to invest in optimizing the solution.
Sorry.
Versions of it to market over time, but pretty excited.
We will introduce that at this time.
Super Thanks.
Thank you I would now like to turn the conference back over to management for closing comments.
Thank you operator, and thank you all again for participating in our call today as we close I'd just like to reiterate our commitment to supporting our customers as they navigate this unprecedented over 19 pandemic and seek solutions to protect to detect can treat the virus also will be remiss if I Didnt Express my guess.
Attitude and admiration for the tireless effort. So all of our associates around the world who are living our corporate values everyday their passion and dedication to our mission, which is setting science the motion to create a better world.
Positions us to help bring life changing therapies that can improve patient outcomes from people across the globe and.
I think as we look at our mission has never been more important than it is today.
I'm certain will come through the stronger than ever before and I'm optimistic about what lies ahead for not only our industry, but specifically for our business look forward to updating you all at the end of the second quarter and until then everyone. Please take care and.
Well, thanks for joining the call today.
This concludes today's conference call you may now disconnect.
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