Q3 2024 West Pharmaceutical Services Inc Earnings Call
Unknown Executive: With our market leadership and proprietary products and continued strength and contract manufacturing, we are making meaningful investments to drive increased capacity to address these new opportunities. We are also making significant progress in ramping up production of HPP delivery devices. The strong increase with on-body self-injection devices during the quarter was driven by a combination of capital investment, improved utilization, and the implementation of a new production line. We anticipate this ramp up to continue into the fourth quarter as we execute on our expansion plans.
Biotech products and continued strength in contract manufacturing, we're making meaningful investments to drive increased capacity to address these new opportunities.
We are also making significant progress in ramping up production of <unk> delivery devices. This strong increase was on bodies self injection devices. During the quarter was driven by a combination of capital investment.
Prove utilization and the implementation of a new production line. We anticipate this ramp up to continue into the fourth quarter as we execute on our expansion plans.
Unknown Executive: We have initiatives in place to improve the margin, including optimizing our main faction process, driving efficiency through automation, and scaling to fill customer demand.
We have initiatives in place to improve the margin, including optimizing our manufacturing process driving efficiency through automation and scale and fulfill customer demand.
Unknown Executive: Now, let me shift to destalking as this remains a factor with our customers. We are starting to see signs of stabilization within our business and recent customer discussions. We have observed a positive shift, with some customers showing interest in increasing their near-term order levels.
Now, let me shift to Destocking as this remains a factor with our customers.
We are starting to see signs of stabilization within our business and recent customer discussions we have observed a positive shift with some customers showing interest in increasing their near term order levels.
Unknown Executive: This gives us confidence that we are getting closer to a turning point in the destalking trend. We now expect continued signs of normalization in our form of business, improving trends in biologics driven by the ramp up in delivery devices, and continue destalking with some generic customers into 2025.
This gives us confidence that we're getting closer to a turning point and the Destocking trend. We now expect continued signs of normalization in our pharma business.
Improving trends and biologics driven by the ramp up and delivery devices.
And continued destocking with some generic customers into 2025.
Unknown Executive: Now, I'll turn the call over to Bernard.
Speaker Change: Now I'll turn the call over to Bernard Bernard.
Bernard Birkett: Thank you, Eric, and good morning. Let's review the numbers in more detail.
Bernard Bernard: Thank you Eric and good morning.
Let's review the numbers in more detail.
Bernard Birkett: We'll first look at Q3, 2020 for revenues and profits, where we saw a low single-digit decline in organic sales, as well as declines in operating profits and diluted EPS compared to the third quarter of 2023. We'll take you through the drivers impacting sales and margin in the quarter, as well as some balance sheet takeaways. And finally, we will provide an update to our 2024 guidance.
Bernard Bernard: First look at Q3 2020 for revenues and profits, where we saw a low single digit decline in organic sales.
Bernard Bernard: As well as declines in operating profit and diluted EPS compared to the third quarter 2023.
Bernard Bernard: It will take you through the drivers impacting sales and margin in the quarter as well as some balance sheet takeaways.
Bernard Bernard: And finally, we will provide an update to our 2020 for guidance.
Bernard Birkett: First up, Q3, our financial results are summarized on slide seven, and the reconciliation of non-US GAAP measures are described in slides 16 to 20. We recorded net sales of $746.9 million, representing an organic sales decline of 0.5%. Looking at slide eight, proprietary products, organic net sales decreased 0.5% in the quarter. High value products, which made up approximately 75% of proprietary product sales in the quarter, declined by low single digits, primarily due to destalking of our Fluoritech, Noble brand, and WestR products. Offset by an increase in sales of our drug delivery devices. Looking at the performance of the market units, the farmer market units saw a mid-single digit increase, driven by an increase in the sales of noble brand products and administrative systems. The biologics market experienced a low single digit decline, primarily driven by destalking of fluoritech, noble pure and WestR products, offset by an increase in our drug delivery device.
Bernard Bernard: First up Q3.
Bernard Bernard: Our financial results are summarized on slide seven and the reconciliation of non U S. GAAP measures are described on slide 16% to 20.
Bernard Bernard: We recorded net sales of $746 9 million.
Bernard Bernard: Representing an organic sales decline of 5%.
Bernard Bernard: Looking at slide eight.
Bernard Bernard: Primary products organic net sales decreased <unk>, 5% in the quarter.
Bernard Bernard: High value products, which make up approximately 75% of proprietary product sales in the quarter declined by low single digits, primarily due to destocking of our floor Atech Novo brand and westar products <unk>.
Bernard Bernard: <unk> offset by an increase in sales of our drug delivery devices.
Bernard Birkett: and the generic market unit declined mid-single digits primarily due to lower volumes in noble band products. Our contract manufacturing segment revenue on a constant currency basis was consistent with our performance for the third quarter of last year. Our adjusted operating profit margin of 21.5% was a 270 basis point decrease from the same period last year. Finally, adjusted diluted EPS declined 14.4% for Q3. Excluding stock-based compensation tax benefit, EPS decreased by 10%.
Bernard Birkett: Now let's review the drivers in both our revenue and profit performance. On slide 9, we show the contributions to organic sales decline in the quarter. Sales price increases contributed 34.2 million dollars of 4.6 percentage points of growth in the quarter, as did a foreign currency tailwind of approximately 2.9 million dollars. Included in sales prices a 19 million dollar customer incentive associated with achieving volume levels. More than offsetting price and FX was a negative volume and mixed impact of 37.6 million dollars, primarily due to lower sales volume caused by customer imagery management decision in the period and a mixed shift from HVP components to drug delivery devices based on customer demand.
Bernard Birkett: Looking at margin performance, slide 10 shows a consolidated close profit margin of 35.4% for Q3, 2024, down from 38.6% in Q3, 2023. Propritory products, third quarter growth profit margin, 39.2%, was 420 basis points lower than the margin achieved in the third quarter of 2023. The key drivers for the decline in proprietary products close profit margin, lower production volumes in a high margin HVP components and a mixed shift to lower margin drug delivery devices, which we expect to increase over time with yield improvements from automation. These margin reductions were partially offset by increased sales price, inclusive of the previously mentioned customer incentives.
Bernard Birkett: Contract manufacturing third quarter growth profit margin of 19.9% was 130 basis points greater than the margin achieved in the third quarter of 2023, primarily due to production efficiencies.
Bernard Birkett: Now let's look at our balance sheet and review how we've done in terms of generating cash for the business. On slide 11, we have listed some key cash flow metrics. Operating cash flow was 463.3 million dollars for the nine months ended September 2024. The decrease of 74.1 million compared to the same period last year. At 13.8% decrease, primarily due to a decline in operating results. For a third quarter 2024 year-to-date capital spending was 272.1 million dollars, 18.8 million higher than the same period last year. last year. We continue to leverage our catbacks to increase both our high value product and contract manufacturing capacity.
Bernard Birkett: Working capital of approximately $1.034 billion at September 30th, 2024, decreased by $230.5 million from December 31, 2023, primarily due to a reduction in our cash balance. Our cash balance at September 30th, 2024, $490.9 million, with $363 million lower than our December 2023 balance. The decrease in cash is primarily due to $506.5 million of share repurchases and our capital expenditures, offset by cash from operations.
Bernard Birkett: Turning to guidance, slide 12 provides a high-level summary. We are increasing our full year 2024 net sales guidance to a range of $2.875 billion to $2.905 billion from a prior range of $2.87 billion to $2.9 billion, reflecting the impact of foreign exchange. There is an estimated full year 2024 headwind of approximately $1 million based on current foreign exchange rates. We expect an organic sales decline of approximately 1.5 to 2%. We are raising our full year 2024 adjusted W and EPS guidance to be in a range of $6.55 to $6.75 compared to a prior range of $6.35 to $6.65.
Bernard Birkett: Also, our CAPEX guidance remains at $375 million, which is unchanged from prior guidance.
Bernard Birkett: There are some key elements I want to bring your attention to as you review our guidance. Full year 2024 adjusted diluted EPS guidance range includes an FX headwind of $2.00 compared to the prior year, which is a decrease from the prior guidance of the $3.00 headwind. The updated guidance also includes EPS of 26 cents associated with the first nine months of 2024 tax benefits from stock-based compensation. Our guidance excludes future tax benefits from stock-based compensation.
Eric Green: I would now like to turn the call back over to Eric.
Eric Green: Thank you, Berner. To summarize the slide 13, we had a solid Q3 performance with a high level of execution focused on our purpose. We are the market leader in adjectables with an even stronger position in biologics. We are investing in capital in higher growth areas with focus on execution, expanded margins, and cash flow. In a confidence that once the market demand normalizes, we will achieve our long-term financial construct with a proven market led strategy and future growth drivers.
Unknown Executive: Operator, we're ready to take questions. Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your questions, please press star 11 again.
Bernard Bernard: <unk>.
Speaker Change: To withdraw your question. Please press star one one again.
Unknown Executive: In the interest of time, we have such a please on yourself to one question and one follow. Please stand by while we compile the Q&A roster.
Speaker Change: In the interest of time, we ask that you. Please limit yourself to one question and one follow up.
Please standby, while we compile the Q&A roster.
Jacob Johnson: And our first question comes from Jacob Johnson with Stevens. Your line is open. Hey, thanks. Good morning, everybody. Congrats on the quarter. I guess just first on the organic growth guidance. You guys, you know, obviously had a really strong 3Q, but you did kind of narrow organic growth towards the lower end of the range.
Speaker Change: And our first question comes from <unk>.
Speaker Change: Jacob Johnson with Stephens Your line is open.
Jacob Johnson: Hey, Thanks, Good morning, everybody congrats on the quarter I guess, just first on the organic growth guidance you guys. Obviously had a really strong three Q oh.
Jacob Johnson: And you did kind of narrow organic growth towards the lower end of the range.
Bernard Birkett: Realized we're talking about 25 bits there, but is there anything that got worse versus your prior expectations that you could call out? And then just along the lines and guidance, the $19 million fee you guys called out. Was that something that was contemplated in prior guidance? Or was that a proverbial good guy? The score. Thanks.
Jacob Johnson: We're talking about 25 bps, there, but is there anything that got worse versus your prior expectations that you could call out and then just along the lines of guidance the $19 million fee you guys called out was that something that was contemplated in prior guidance or is that a proverbial good guy this quarter. Thanks.
Bernard Birkett: And Jacob, I'll take that on the second part of the question. Yeah, that's the 19 million that was contemplated. It was obviously beta based on volumes that we had to achieve. You know, an agreement with our customer, and we achieved that. So we wasn't a surprise to us.
Speaker Change: Hey, Jacob I'll take that.
Speaker Change: On the second part of the question, yes that the $19 million contemplate us.
Speaker Change: It was obviously beta based on volumes that we had to achieve.
In agreement with our customer and we achieved that.
Speaker Change: We wasn't a surprise to us.
Bernard Birkett: On the guide itself, it's really just rounding the change for Q4. So no real material change. The difference from Q3 to Q4 is really tiny on when we delivered on customer's orders and some expectations. So again, no real change to our outlook on the year.
Speaker Change: On the guide itself, it's really just rounding.
Speaker Change: The change for Q4.
Speaker Change: So no real material change there.
The difference from Q3 to Q4, it's really timing.
Speaker Change: When we delivered on customers' orders and some expectations. So again, no real change to our outlook on the year.
Unknown Executive: Yeah, thanks for that, Bernard.
Speaker Change: Got it thanks for that Bernard and maybe sticking with you.
Bernard Birkett: It may be sticking with you. In short, quarter, you mentioned the potential for your margin profile to return to 2023 levels.
Speaker Change: Intra quarter.
Speaker Change: You mentioned the potential for your margin profile to return to 2023 levels. Once you return to <unk> growth.
Bernard Birkett: Once you return to LRP growth, can you just talk about your visibility into getting back to that kind of margin profile and kind of how quickly post-d stocking you could get back to those levels? Yeah, so it's really down to when demand normalizes and also that the mix within our business normalizes. When we get to that point, you know, we get back to our LRP, then the margins adjust back to 2023 levels. So it's really a mixed impact, and then that level of demand normalization.
Speaker Change: Can you can you just talk about your visibility into getting back to that kind of margin profile and kind of how quickly post destocking you could get back to those levels.
Speaker Change: Yeah, So it's really down to when demand normalizes and also that the mix within our business normalizes, when we get to that point.
Speaker Change: We can we get back to our MLP then the margins are just back to the 22023 levels. So it's really a mix impact.
Speaker Change: And then that level of demand normalization.
Unknown Executive: I'll leave it there.
Speaker Change: Got it I'll leave it there thanks for taking the questions.
Unknown Executive: Thanks. Thank you for your questions. Thank you. Thanks, Jacob.
Speaker Change: Thanks Jacob.
Larry Sola: Thank you. Our next question comes from Larry Sola with CJS Securities. Your line is open. Great, thanks. Good morning, everybody.
Speaker Change: Thank you. Our next question comes from Larry Solow.
Speaker Change: <unk> with CJS Securities. Your line is open.
Larry Solow: Great. Thanks, Good morning, everybody I guess first question just on the quarter itself.
Bernard Birkett: I guess first question, just on the quarter itself and obviously a pretty solid quarter, you know, especially relative to expectations. Was the higher end driven more on the just slower customer destocking, or was it more on the demand side? Anyway, to kind of parcel that out, and it does sound like there's a little bit of, I guess, timing maybe was a little bit of a good guy in the quarter two? Yeah, very good morning. No, absolutely. What we observed in Q3 was really a couple of factors. One is around execution continued to deliver on the commitments that we made with our customers.
Larry Solow: Obviously, a pretty solid quarter, especially relative to expectations.
Larry Solow: What was the higher end driven more on the slower customer destocking or was it more on the demand side any way to kind of parcel that out and it does sound like there's a little bit of I guess timing, maybe it was a little bit of a good guy in the quarter too.
Speaker Change: Yes, good morning.
Speaker Change: Absolutely what we observed in Q3 was really a couple of factors one is around execution continue to.
Speaker Change: Deliver on the commitments that we've made where their customers and secondly is that in a few cases, our customers are they have accelerated.
Bernard Birkett: And secondly, in a few cases, our customers are they have accelerated some of their programs and asked us to deliver a little ahead of schedule, but they were contemplated and planned for already within the second half of 2024. So it's really mostly around timing. It has given us the additional growth, and in Q3 Gotcha.
Speaker Change: Some of their programs and asked us to deliver a little ahead of schedule, but they were they were contemplated and plan for already.
Speaker Change: Within the second half of 2024, so it's really mostly around timing.
Speaker Change: He has given us additional growth in Q3.
Bernard Birkett: I know it's too early to look out to 2025, but it does sound like, without putting an actual number on it, it does feel like you guys are perhaps a little more confident that we at least begin that recovery. Maybe don't get fully normalized for the full year, but do you feel like, as you look out, we could have a relatively normal kind of demand year for you guys or not much inventory. Is stocking at least going forward? Yeah, there are a couple of factors around there. One is the underlying focus of our businesses is very, very strong, and we're trying to need to participate in the very attractive areas and a number of initiatives that are in light and the attractions are very positive.
Speaker Change: Gotcha.
Speaker Change: Eric.
Speaker Change: No. It's too early to look out to 2025, but it does sound like.
Speaker Change: Would that without putting.
Speaker Change: An actual number on it it does feel like you guys are perhaps a little more confident that we at least begin that recovery, maybe you don't get fully normalized for the full year, but do you feel like as you look out.
Speaker Change: Could have a relatively normal kind of demand year for you guys or not much inventory destocking at least going forward.
Speaker Change: Yes.
Speaker Change: Factors around there one is the underlying.
Speaker Change: Focus of our business is very very strong and we continue to participate in.
Speaker Change: Very attractive areas and a number of initiatives are in place and the attractions or the traction is very positive.
Bernard Birkett: You know, we have been speaking about these stocking, considering the last quarter, we kind of highlighted what we felt was going to kind of play out in 2024, and that's what's happening. We're seeing the consistent, consistent to what we said earlier, which is basically we do believe in our pharma business that has mostly normalized as we speak. And so you can't can see that little bit of return to growth in that particular area. We're seeing improving trends in biologics, but we did say that that would be throughout Q3 and a little bit in Q4. So we do see that continue to play out as is, and then we did call out, and we still do these stocking with some generic customers that go into 2025.
We have been speaking about destocking.
Speaker Change: Last quarter, we call, we kind of highlighted what we felt was going to kind of play out in 'twenty two.
Speaker Change: <unk> 24, and that's what's happening we're seeing that.
Speaker Change: The consistent.
Speaker Change: Consistent to what we said earlier, which is basically we do believe in our pharma business that has mostly normalized.
Speaker Change: As we speak and so you can see that a little bit of a return to growth in that particular area, we're seeing improving trends in biologics, but we did say that that would be throughout Q3, and a little bit in Q4. So we do see that continue to play out as is.
Speaker Change: And then.
Speaker Change: We did call out and we'd still do.
Speaker Change: Destocking with some generic customers that go into 2025.
Bernard Birkett: So, you know, my comment was around certain seed signs of stabilization with their business because it's consistent to the conversations we're having with our customers today.
Speaker Change: So without so you know my comment was around starting to see signs of stabilization with their business because it's consistent.
Speaker Change: The conversations we're having with customers today and there tends to be a little more.
Unknown Executive: And there tends to be a little more positive in those conversations, but let's get through Q4 before we even comment at about 25 at this point in time. I really appreciate that college.
Speaker Change: Positive and those conversations, but let's let's get through Q2 Q4 before we even commented it's about 25 at this point in time.
Speaker Change: No no great I really appreciate the color just if I can squeeze one last question just capex plans going forward does it just feel like this is the peak year or.
Bernard Birkett: Just if I can squeeze one last question, just capex plans going forward. Does this feel like this is the peak year, or, you know, could 25 be sort of similar, you know, roughly? Any thoughts on that, Bernard? Yeah, it's, you know, I think again, we'll give guidance on capex for 25 in February. But it is something that we are looking at based on, you know, the demand what we're seeing and where capacity increases that we need to add. We will continue to add where we see growth. And continue to review those programs, but a, you know, over the next, I would say 12 to 24 months, we will be looking to get back to a more normalized level of capex.
Speaker Change: 25% sort of similar.
Speaker Change: Roughly and any thoughts on that Bernard.
Speaker Change: Yeah.
Bernard Bernard: I think.
Bernard Bernard: Again, we'll give guidance on capex for 'twenty five in February.
Bernard Bernard: It is something that we are looking at based on.
Bernard Bernard: The demand and what we're seeing and where the capacity increases that we need to add we will continue to add where we see growth.
Bernard Bernard: We continue to review those programs.
Bernard Bernard: Over the next.
Bernard Bernard: I would say 12 to 24 months, we will be looking to get back to more normalized level of capex.
Unknown Executive: And that that's the trend that we're starting to see, Larry. Gotcha. Great. Appreciate all the questions. Thank you.
Speaker Change: That that's the trend that we're starting to see Larry.
Larry Solow: Got it great I appreciate all the color thanks, guys.
Speaker Change: Right.
Thank you.
Paul Knight: And our next question comes from Paul Knight with Key Bank. Your line is open. You know, the comment about wearable injection devices.
Speaker Change: And our next question comes from Paul Knight with Keybanc. Your line is open.
Hi, Eric.
Speaker Change: The comment about wearable.
Speaker Change: Injection devices does that mean Phoenix line is built and producing.
Paul Knight: Does that mean Phoenix line is built and producing, and then kind of the follow up is, could we get an update on? Grand Rapids, Michigan, and the Dublin facility as well. Yeah, yeah, good morning, Paul, and thanks for the question. I'm the two-fold. The first one on SMART, those particular Phoenix facility, you correct? That ramp up started in Q3, where we did receive FDA approval for commercial manufacturing into the market, and we're really excited about that new team that has been put together, and just the level of capability of the ramp up. They're meeting expectations, and I'm really proud of that team to really go from a brand-new facility, and now producing high-quality products going to the market.
Speaker Change: And then kind of a follow up is could we get an update on our <unk>.
Speaker Change: Grand Rapids, Michigan, and the Dublin facility as well.
Speaker Change: Yeah, Yeah, good morning, Paul and thanks for the question.
Speaker Change: Two for the first one on smart those particular Phoenix facility, you're correct that that ramp up started in.
Speaker Change: Q3, where we did receive FDA approval for commercial.
Speaker Change: Manufacturing into the market and we're really excited about that.
Speaker Change: New team that's been put together and just the level of.
Speaker Change: Capability of.
Speaker Change: The ramp up there are meeting expectations and I'm really proud of that team.
Speaker Change: To really go from a brand new facility and now producing high quality products going into the market. So I'm very pleased.
Paul Knight: So I'm very pleased. And well, as you know, a lot of these startups and these ramp-ups do take time. So it's going to be, you know, it's going to take several quarters to get to what I call peak peak throughput, but the initial results are very, very positive.
Speaker Change: As you know a lot of these startups and ramp ups do take time, so it's gonna be a it's going to take several quarters to get to what I call peak peak throughput.
Speaker Change: But the initial results are very very positive.
Paul Knight: In regards to the facilities, investments in Grand Rapids and Dublin, these are two contract many factory facilities that are really focused on the bill, support our customers and GLP ones. And Grand Rapids, Michigan, that is still ramping up as we speak. We are producing a commercial product, but it is still in Rapids phase. As you know, that takes probably a good three to five quarters to really get. To the levels that we expect and what our customers expect, cars to put on double is a little bit longer. This is kind of a two-stage approach. The first is the manufacturing of the devices for contract manufacturing again, GLP ones.
Speaker Change: In regards to the facilities investments in Grand Rapids in Dublin is or two contract manufacturing facilities.
Speaker Change: That are.
Speaker Change: Really focused on the build to support our customers in GOP ones in Grand Rapids, Michigan that is still ramping up as we speak.
Speaker Change: We are producing commercial product, but it is still in ramp up phase as you know that takes probably a good three to five quarters to really get to the levels that we expect and what our customers expect throughput.
Speaker Change: It's a little bit longer this is kind of a two stage approach.
Speaker Change: The first is the manufacturing.
Speaker Change: Of the.
Speaker Change: <unk>.
Speaker Change: Devices for contract manufacturing again, GOP ones and that will commence shortly.
Paul Knight: And that will commence shortly, probably early 2025. And as that ramp ramps up, we're also adding, adding in that facility, already communicated before, but just to reiterate the drug handling. So we'll be taking a finished drug product and contained and put it with the device that we're going to manufacture there. So it's a complete solution for our customer. We're really excited about that because that's playing out our high value product or high value focus on contract manufacturing, adding services and capabilities that really help us expand. And that's just revenue, but also margin in that particular business.
Speaker Change: Probably early 2025.
Speaker Change: And as that ramp ramps up we're also adding in that facility already communicated before but just to reiterate the drug handling so we'll be taking.
Speaker Change: Our finished drug product.
Speaker Change: <unk> and.
Speaker Change: Put it with our the device that we are going to manufacture there. So it is a complete solution for our customer we're really excited about that.
That's playing out our high value product or a high value focus on contract manufacturing, adding services and capabilities that really help us expand and just revenue, but also margin in that particular business. So there are different timelines, they're honest right now our teams are executing with it.
Paul Knight: So they're different timelines. They're honest right now. Teams are executing within as planned, and I'm excited to see full production in the near future from both sites.
Speaker Change: As planned.
Speaker Change: And I'm excited to see a.
Speaker Change: Full production in the near future from both sites.
Paul Knight: Just to on the phoenix size that that's in two phases, what we've at us at currently is another kind of manual semi automated line. And that's all ramping. And then, as we progress through 2025, will be implementing a fully automated line to drive production efficiencies greater legislation. And also to meet the cost of a demand for that product so that that will happen throughout 2025. So we expect to see margin improvements in that product lying over the next. 6-12 months.
Speaker Change: Also on the Phoenix size, that's in two phases, while we've had us.
Speaker Change: At currently is another kind of manual semi automated line.
Speaker Change: And Thats what were ramping it and then as we progress through 2025 will be implement in a fully automated line.
Speaker Change: To drive production efficiencies greater levels of utilization and also to meet the customer demand for that product. So that that will happen throughout 2025. So we expect to see margin improvements in that product line over the next.
Speaker Change: Six to 12 months.
Unknown Executive: Thanks.
Michael Reiskin: Thank you.
Speaker Change: Thanks.
Michael Reiskin: Our next question comes from Michael Reiskin with Bank of America. Your line is open. Thanks for taking the question, guys. Going back to some of your comments on 3Q, benefiting from some timing, meeting some customers ahead of schedule, just curious if you could dig into that.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Michael <unk> with Bank of America. Your line is open.
Speaker Change: Hey, Thanks for taking the question guys.
Michael <unk>: Going back to some of your comments on <unk> benefiting from some timing you know meeting some customers ahead of schedule. Just curious if you can dig into that what was it one or two large orders or was it a little bit broader in terms of the timing benefit.
Bernard Birkett: Was it one or two of our jorders, or was it a little bit broader in terms of the timing benefit? Was it in more of the pharma customer where you talked about, you know, the stocking normalizing or in biologics and are there, you know, now that you've completed those orders and you've delivered them in 3Q, are there others sort of behind them to fall into Q in terms of backlog and, you know, is there other work behind that to backfill? Yeah, Michael, thank you for the question. Good morning. The work that we did with our customers is some of broad.
Speaker Change: Was it in.
Speaker Change: More of the pharma customer, where you talked about you know.
Speaker Change: Destocking normalizing or in biologics.
Speaker Change: And are there you know now that you've completed those orders and you deliver them and <unk> are there other sort of behind them to fall into Q2.
Speaker Change: Backlog in.
Speaker Change: Is there other work behind that to backfill.
Speaker Change: Yes, Michael Thank you for the question and good morning.
Speaker Change: The work that we did with our customers is some abroad.
Bernard Birkett: I went isolated to one or two customers, and it was primarily in the areas of biologics and pharma, and so there's specific reasons behind it, but these are obviously requests. We already had in our production plans or schedules to be able to support our customers on these specific products. But they were brought forward to meet their needs and their demand. Now, obviously, we won't comment, you know, in 2025, but as we think about for the rest of the year, as our customers continue to replenish their orders, we will, obviously, be ready to respond if orders do come in in later this quarter in Q4 for those particular customers.
Speaker Change: Isolated to one or two customers and it was primarily in the areas of biologics and pharma.
Speaker Change: And so there are specific reasons behind it but these are obviously request we already had in our production plans or schedules to build support our customers on these specific products, but they were brought forward to meet their needs and their demand.
Speaker Change: Now obviously, we won't comment you know 2025, but as we think about for the rest of the year as our customers continue to.
Speaker Change: Replenish their orders we will.
Speaker Change: Honestly you'd be ready to respond.
Speaker Change: If orders do come in in later this quarter in Q4.
Michael Reiskin: But as we speak right now, that's the reason why you see. We call out a little bit earlier delivery of those particular products into Q3 versus Q4. Okay. Thanks. That's helpful.
Speaker Change: For those particular customers, but as we speak right now.
Speaker Change: That's the reason why you see we called out a little bit earlier delivery of those particular products into Q3 versus Q4.
Speaker Change: Okay. Thanks, that's helpful and quick follow up on the you talked through the changes on the top line for the guide.
Bernard Birkett: And quick follow-up on the, you know, you talked through the changes on the top line for the guide for EPS. I think you raised the midpoint by 15 cents, but five cents of that, you know, four cents was incremental stock-based comp. One cent was FX.
Speaker Change: For EPS I think you've raised the midpoint by <unk> <unk>, but <unk> of that <unk> was incremental stock based comp one was FX.
Bernard Birkett: The 10 cents that's operational, is that driven by the mix, you know, the one-time benefit, the 19 million dollars you saw in the third quarter, just talk us through the 10 cents there. It's driven by a number of things. Mix was part of us. Or operating margin was a little bit stronger than we would have initially anticipated. And so it's really managing mix and also managing costs within our business on an ongoing basis to, you know, try that margin improvements and improvements in EPS. Thanks for not just one paper.
Speaker Change: 10 cents, that's operational is that driven by the mix you know the the onetime benefit the $19 million you saw in the third quarter, just talk us through the 10 cents there.
Speaker Change: It's driven by a number of things mix was part of this.
Speaker Change: Our operating margin was a little bit stronger than we would have initially anticipate us and so it's really managing mix and also managing costs within our business on an ongoing basis to drive that margin improvement and improvement in EPS.
Speaker Change: I'm not sure.
Speaker Change: Just one thing here thank.
Speaker Change: Thank you.
David Winley: And our next question comes from David Winley with Jeffries. Your line is open. Hi.
Speaker Change: Thank you.
Speaker Change: Our next question comes from David Windley with Jefferies. Your line is open.
David Winley: At the risk of asking a simple question, I noted, I guess, first, you’ve used the Nova brand brand in commentary today. And I know you also talked about that at a conference in the quarter, but I think that's the first time we had heard that. And I noted that in your comments today, you did also use Nova Pure. So they seem to be distinctly different, or maybe parts of the same broad category. Could you talk about what Nova brand is, what it includes, how new is it? And how is it that it is the source of growth in some and the source of headwind in others?
David Windley: Hi at the risk of asking a simple question.
David Windley: I noted I guess first you you've used at Nova brand brand and commentary today and I know you also talked about that in a car.
David Windley: First in the quarter, but I think that's the first time, we had heard that and.
David Windley: I noted that in your comments today, you did also use nova pure so they seem to be.
Speaker Change: Distinctly different or maybe parts of the same broad category could you talk about what what Nova brand is what it includes how new is it and how is it that it is the source of growth and some in the source of headwind and others.
Unknown Executive: Good question.
David Windley: Yes.
Unknown Executive: Thanks for joining us this morning. So Nova Brand encompasses the quality of a design principles of our highest quality product. One is Nova Pier, which is the laminated version with Fluoritech, and then the non-laminated version is Nova Choice. And what you'll find is Nova Pier is highly adapted in the, what's called in the biologics area. And Nova Choice tends to be more adapted in the pharmaceutical area, but doesn't require the coding. And so that's the, that's the normal creature of the products. Now, Nova Choice, it depends on the segment. So, as you know, Nova Pier is, again, as I mentioned, really well-adapted in the biologics.
Speaker Change: Good question Craig.
David Windley: Thanks for joining us this morning, so another brand as it encompasses.
David Windley: By design principles of our highest quality product. One is novel up here, which is the laminated version with Florida Tech and then the non laminated version.
No other choice and what you'll find is Nova peer.
David Windley: Is highly adopted in the.
David Windley: It's called in the biologics area.
David Windley: No the choice tends to be.
David Windley: More adopted in the in the.
David Windley: Pharmaceutical.
David Windley: Area that doesn't require the coding.
David Windley: And so that's the that's the normal quite sure of the products now nobody choice.
Speaker Change: It depends on the segment. So as you know Nova peers again, as I mentioned really well adopted in the biologics and that's where we had some destocking occur throughout 2024, we've called that out in 'twenty and Q3.
Unknown Executive: And that's where we had some destocking occur throughout 2024. We called that out in Q3. We anticipate a little bit going into Q4.
Speaker Change: Dissipate a little bit going into Q4, and then Nova choice that is one of the key solutions in the G. L P ones.
Unknown Executive: And then Nova Choice, that is one of the key solutions in the GLP ones for us to support our customers. It says you can imagine the ramp up that we're starting to see in the GLP ones. We're able to support them with our high participation rate of really Nova Choice, and also a West R U that we provide our customers in that area. So that's how it's defined between the two.
Speaker Change: For us to support our customers and so as you can imagine the ramp up that we're starting to see in a G. L. P. Once we're able to support them with their high participation rate of really no choice and also west or.
Speaker Change: Are you that we provide our customers in that area. So that's how it's defined big between the two.
Unknown Executive: Very helpful.
Speaker Change: Very helpful.
Unknown Executive: If I could ask, I'm going to squeeze two follow-ups. So just on what you just answered, is the Nova Choice pricing similar to Nova Pier? And then secondly, Eric, on your comments about participation rate remaining very high, which you've been very consistent about, would you be willing to talk about what you think your wallet share is? So I think, I believe your definition of participation rate is your spectrum on the product. How does that look in terms of sole versus, you know, dual source or otherwise in the participation rate?
Speaker Change: If I could ask Oh, I'm going to squeeze two follow ups. So so just on what you just answered.
Speaker Change: Is the Nova choice pricing similar to Nova pure and then secondly, I'm Eric on your are your comments about participation rate remaining very high which you've been very consistent about would you be willing to talk about what you think your wallet share wallet share is so so I think.
Speaker Change: I believe your definition of participation rate as you're specced in on the product.
Speaker Change: How does that look in terms of so versus dual sourced or otherwise in AR and the participation rate. So a price on Nova choice and then wallet share. Please thanks.
Unknown Executive: So price on Nova Choice, and then wallet share, please. Thanks. Yeah, Dave, Nova Choice is between 15 to 30 cents per unit on ASP, 50 to 60 percent margin.
Speaker Change: David No choice is between 15 to 30 per unit on Asps, 50% to 60% margin TV kind of perspective, so the key differentiator again as the barrier coda flotek.
Unknown Executive: TV can't perspective. So the key differentiator, again, is the barrier code of Fluorotech between that and Nova Pier, which technical, I mean, from a user need basis is quite a significant difference between barrier and non-barrier. And in regards to participation rate, you're right; we do look at, are we spec'd in the filings of our customer and the drug companies of our product. And there is a few cases where you do see dual sourcing, but what we are seeing and we continue to see is that in these particular examples, we are very high, far as the percentage of the drug molecule.
Speaker Change: Between that and Nova peer, which technically I mean.
Speaker Change: User need basis is quite a significant difference between barrier and now barrier.
Speaker Change: And in regards to participation rent you're right we do.
Speaker Change: Look at our we expect in <unk>.
Speaker Change: Filings of our customer the drug company and some of our product.
Speaker Change: And there is a few cases, where you do see dual sourcing, but what we what we are seeing and we continue to see is that we.
Speaker Change: We in these particular examples we are very high bar as the percentage of the on the drug molecule and.
Unknown Executive: And I haven't changed. If you're talking about a particular area like GLP1, we're really key players in that space from all from a volume perspective. So, and that's pretty consistent as we look at biologics in other areas. Yes, there is some testing for dual sourcing capabilities, but that's more for as frequent. And it's more on new launches, not on existing molecules in the market.
Speaker Change: And that Hasnt changed if you will.
Speaker Change: Talking about a particular area like <unk>, where really the key player in that space from from all from.
Speaker Change: From a volume perspective, so and that's pretty consistent as we look at biologics and other areas. Yes. There is some.
Speaker Change: Testing for dual sourcing capabilities, but that's more for inside as frequent and it's more on new launches not on existing molecules in the marketplace.
Unknown Executive: please. Very good. I appreciate the answers. Thank you. Great, thank you.
Speaker Change: Very good I appreciate the answers thank you.
Speaker Change: Great. Thank you.
Matt LaRue: Thank you. Our next question comes from Matt LaRue, with William Blair. Your line is open.
Speaker Change: Thank you. Our next question comes from Matt <unk>.
Speaker Change: <unk> with William Blair. Your line is open.
Matt LaRue: I Good morning. I want to ask about contract manufacturing; Bruce Martin there, we're up nearly 400 basis points sequentially. You've referenced obviously scaling capacity at N Dublin and Grand Rapids, and also adding new capabilities with higher revenue and margin potential. Most of the story over the last, you know, called five or seven years has been margin expansion on the proprietary product side. Just wonder if you could maybe use in this quarter as a window into what the potential is for contract manufacturing moving forward. Yeah, I think if you're looking out over the next like 12 to 24 months, would we see a slight offtake on the contract manufacturing as can the drug handling, you know, bit business comes on board because that is a very different margin profile as we're a current contract manufacturing business.
Matt <unk>: Hi, Good morning, I wanted to ask about contract manufacturing.
Speaker Change: Gross margins there were up nearly.
Speaker Change: 100 basis points sequentially.
Speaker Change: You've referenced obviously scaling capacity.
Speaker Change: At Dublin, and Grand Rapids, and also adding new capabilities with with higher revenue and margin potential most of the story over the last seven.
Speaker Change: Seven years, that's been margin expansion.
Speaker Change: Pricing product side, just wondering if you could maybe using this quarter as a window into what that potential.
Speaker Change: And as for contract manufacturing moving forward.
Yeah, Matt I think if youre looking out over the next.
Speaker Change: Like 12 to 24 months, we see slight uptick on the contract manufacturing is can the drug handling.
Speaker Change: Business comes on board because that is a very different margin profiles, where our current contract manufacturing business, but for us to scale that is going to take a little bit of time, So I would anticipate.
Bernard Birkett: But for us to scale that, it's going to take a little bit of time. So I would anticipate the margins around contract manufacturing to be relatively consistent with what they are now. We get a little bit of variability between quarters depending on product mix and the level of kind of DA or engineering work that's involved. That's pretty consistent within the high teams. So it's more a lot longer term where we would see it say like a significant step up in the margins within CM. Okay, as a whole, again, a number of times today called out the GLP as an offset, some of the destocking your strong share in that space.
Speaker Change: The margins around contract manufacturing to be relatively consistent with what they are now.
Speaker Change: Get a little bit of variability between quarters, depending on product mix and the level of kind of D. A R engineering work, that's involved but pretty consistent.
Speaker Change: Within the high teens.
Speaker Change: So it's more of that longer term, where we would see as a like a significant step up in the margins within <unk>.
Speaker Change: Okay.
Speaker Change: Again, a number of times today and called out.
Speaker Change: As an offset to some of the Destocking, you're strong share in that space.
Eric Green: It's a bit hard from the outside to compare the cadence of benefit to you versus what we might see from some of the drug companies themselves in terms of their sales reporting. Could you basically give us sort of a state of the union as to where you see, you know, the size of your business today so that you can quantify that and also any updated thoughts on go forward growth and market opportunity. Thanks. Matt, just to clarify, we're just specifically focused on GLP ones, I think. I'm just wanting to share over that correctly, correct? Correct, correct, yes, thanks, Eric.
Speaker Change: Yes, it's sometimes it's hard from the outside to compare the cadent benefit to you versus what we might see from some of that.
Speaker Change: Drug companies themselves in terms of their sales reporting.
Speaker Change: Can you just give me a sort of a state of the union as to where you see.
Speaker Change: The seismic business today to the extent you can quantify that and also any updated thoughts on go forward growth and market opportunity.
Speaker Change: Matt just to clarify were you just spin.
Speaker Change: Specifically focus on the <unk> ones I didn't I was wondering sure I heard that correctly correct.
Eric Green: Okay, great. Thanks, Matt. Sorry, I just want to share her correctly. Yeah, absolutely. So we will not talk about the demands of our customers. I would refer to them on the future demand of the GLP ones in the market, but if we take a look at how we are positioned, the agreements we are in place, and where we play, we play in two areas: one in proprietary, which is the alaspers and seals, and then the other areas contract manufacturing. Let me just touch on contract manufacturing quickly; now move back to proprietary. In that area, we do participate, as I mentioned earlier around, for example, the investments in Grand Rapids and also in Dublin to manufacture and assemble the auto injectors and pens.
Speaker Change: Correct correct, yes, okay, great. Thanks, Pat sorry, I, just want make sure I heard correctly, yeah, absolutely. So we will not talk about the demands of our customers.
Speaker Change: I would refer to them on the future demand of.
Speaker Change: They're the GOP ones in the market, but if we take a look at our how we are positioned the agreements we are or are in place and where we play we play in two areas. One in proprietary which is the last version seals and then the other areas contract manufacturing, let me just touch on contract manufacturing quickly they'll move back.
Speaker Change: To proprietary in that area, we do participate.
Speaker Change: I mentioned earlier around for example, the investments in Grand Rapids, and also on Dublin.
Speaker Change: To manufacturer.
And assemble the auto injectors and pens. So we do participate in that but that is as you can tell.
Eric Green: So we do participate in them, but that is, as you can tell, it's highly competitive. We're selective on what projects or initiatives we want to take on because it's heavily capital intensive. And so we're participating in that area, and it does support us with our large customers, but it's very selective. On the proprietary side, in that growth, by the way, it will be dependent on patient consumption. So whether it's a pen or an auto injector. The on the on the proprietary side, if it's a wild configuration, we're obviously there with their stoppers. We have been, we will continue to be.
Speaker Change: It's highly competitive.
Speaker Change: We're selective on what.
Speaker Change: Projects or initiatives, we wanted to take on because it's heavily capital intensive.
Speaker Change: And so we're participating in that area and it does support us with our large customers, but it's very selective on the proprietary side and that growth by the way will be dependent on and patient patient consumption. So whether it's the <unk> auto injector.
Speaker Change: On the on the proprietary side, if its vial configuration, where obviously.
Speaker Change: With their stoppers, we have been we will continue to be in.
Eric Green: And then if it is in a pen or an auto injector, we do provide the plungers and also insulin sheeting if, and if needed, on their configuration. And that is very high as far as the volumes that we are producing. Going forward, we have forecast; we really have a dimension that we have really called that out as a specific area. But it is starting to pick up with the investments we put in. If we look forward, what we need to do to be able to support that growth, the capital that we require a lot of authority installed, which is very positive.
Speaker Change: And then if it is in a.
Speaker Change: Tenant or a auto injector, we do provide lenders.
Speaker Change: So insulin sheeting, if in if needed.
And on their configuration and that is our is very high as far as the volumes that we're producing.
Speaker Change: Going forward, we have forecast, we really havent dimension, Matt we haven't really called that out as a specific area.
Speaker Change: But it is starting to pick up with the investments we put in if we look forward what.
Speaker Change: What we need to do to be able to support that growth. The capital that we require a lot of it's already installed which is very positive we do need over time based on the forecast that we are working with our customers on it.
Eric Green: We do need overtime based on the forecast that we are working with our customers on is looking at maybe some more HP finishing similar to what we put in Kingston. We're putting into. Jersey Shore and also an Eschweiler, but it's really the finishing area that we are looking at as you know that's plungeable to other types of customers like biologics around HPP. So that's kind of where the investment thesis will be different when needed, but fortunately we have, because our investments over the last few years, really supports the growth in this particular area going forward.
Speaker Change: Is looking at.
Speaker Change: Maybe some more at HCP, finishing soon.
Speaker Change: Similar to what we put in Kinston, and we're putting into it.
Speaker Change: Jersey Shore and also an S weather.
But it's really the finishing area that we're looking at as you know is fungible to other types of customers like biologics.
Speaker Change: Around <unk>, so that's kind of where the investment thesis will be if and when needed, but fortunately we have because of our investments over the last few years really supports the growth in this particular area going forward.
Matt LaRue: Okay, thanks for that, Eric. Thanks, Matt.
Speaker Change: Okay. Thanks for that Eric.
Ben: Thanks Ben.
Unknown Executive: Thank you.
Speaker Change: Thank you.
Justin Bowers: Our next question comes from Justin Bowers with DB; your line is open. And you maybe at a high level just talk about what inning you think we're in with respect to the destocking and then are there amongst the different components. Are you closer to the finish line versus others like you know let's say standard versus no pure versus floor attack. And then part two would be just around the margins. You know you've had some pretty high decremental this year. As long as you begin to normalize, is there is there any reason why you wouldn't have, you know, greater incremental on the way back up and maybe above construct.
Speaker Change: Our next question comes from Justin Bowers with DB. Your line is open.
Justin Bowers: Can you.
Justin Bowers: Maybe at a high level just talk about what inning, you think we're in with respect to the Destocking and then are there.
Justin Bowers: Amongst the different components are you closer to the finish line versus others like let's say standard versus now with pure versus floor attack.
Justin Bowers: And then part two would be just around the margins.
Justin Bowers: You've had some pretty.
Justin Bowers: Hi, Decrementals this year.
Justin Bowers: As volumes begin to normalize is there is there any reason why you wouldn't have.
Justin Bowers: Greater incrementals on the way back up and maybe above construct.
Eric Green: Yeah, Justin let me take the first part of the burner if you don't mind the second part. It regards to kind of where we are with the destocking area. I think the way that we've been consistently communicating is that it's not equal across the entire customer portfolio and or product portfolio, but by the way the product portfolio is really driven by the market segments. And so we've been pretty clear that in the farm farm area, the small molecule, we've seen that more normalized recently. So we feel if you want to look at from the spectrum, it's closer to the end, let's say.
Speaker Change: Yeah. So let me let me take the first part and then Bernard if you don't mind in the second part.
In regards to kind of where we are with the Destocking area I think.
Speaker Change: We've been consistently communicating is that its not equal across the entire.
Bernard Bernard: Our customer portfolio and or product portfolio, but by the way the product portfolio is really driven by the market segments.
Bernard Bernard: So we've been pretty clear that in the pharmacy pharma area of small molecule.
Bernard Bernard: We've seen that more normalized so we feel if you if you want to look at from the spectrum, it's closer to the end, let's say it works.
Bernard Birkett: And we're starting to see more normalization of order patterns and future outlook. We look at the biologics; we are very clear with our customer conversations. If you take the drug delivery devices off the table from a discussion point of view, the last person products used for containment. That particular area we continue to see these stocking in Q3. And, as we mentioned, we'll see a little more in Q4. We do see that getting closer to the end, but let's go through our Q4. And as we think about our order book going forward, we'll update you in the first part of the year about 2025.
Bernard Bernard: Starting to see more normalization of order patterns and.
Bernard Bernard: Future outlook.
Bernard Bernard: When you look at the biologics is very clear with our customer conversations.
Bernard Bernard: If you take the drug delivery devices.
Bernard Bernard: Off the table from a discussion point of view.
Bernard Bernard: The.
Bernard Bernard: The last person price used for containment that particular area. We continue to see Destocking in Q3, and as we mentioned we will see a little bit more in Q4, we do see that getting closer to the end but.
Let's go through our Q4 and it was as we think about our order book going forward, we'll update.
Bernard Bernard: Update to the first part of the year about 2025 biologics. So we've been pretty consistent that particular of a few customers that we believe that while there is some positive conversations about future demand. It's we do believe that's going to continue into the first part of 2025. So that's all.
Bernard Birkett: Biologics, so we've been pretty consistent that particular of a few customers that we believe that while there's some positive conversations about future demand, we do believe that's going to continue into the first part of 2025. So that's how we look at it from a de-stocking point of view. I didn't give you an aggregate total on that, but it is mixed based on the customer segments. And it's pretty consistent. It's playing out as we started to communicate how it's called the last quarterly call. And we'll keep an eye on that and make sure that we deliver. In a year, we'll reassess as we think about going forward.
Bernard Bernard: We look at it from a destock.
Bernard Bernard: Destocking point of view I didn't give you an aggregate total on that but it is mixed based on the customer segments.
Bernard Bernard: And it's it's pretty consistent is playing out as we started to communicate.
Bernard Bernard: Call. It the last quarterly call. It we'll keep we'll keep an eye on that and make sure that we deliver and you reassess.
Bernard Bernard: As we think about going forward. So the margin conversation burner can you yeah. So.
Bernard Birkett: So the margin conversation, Bernie, can you tell on the margin what we would expect is when demand normalizes and are mixed normalizes, that we would get back to or 2023 levels of operating margin and then through the long-term construct, grow 100 basis points per year off that. When we look at what's occurred this year in 24, at much of the de-stocking we've seen within biologics and generics, and that's where typically we would tend to see more HB product sales. And obviously, then the margin impact has been, you know, greater than what we would have seen prior to that when we saw de-stocking with Informa.
Speaker Change: On the margin what we would expect is when demand normalizes and our mix normalizes.
Speaker Change: We will get back to our 2023 levels of operating margin and then through that are a long term construct grow a 100 basis points per year off that.
Speaker Change: When we look at what's occurred this year and 24.
Speaker Change: Much of the Destocking, we've seen within biologics and generics and Thats, where typically we tend to see more HP product.
Speaker Change: And obviously then the margin impact has been.
Speaker Change: <unk>.
Speaker Change: Greater than what we would've seen prior to that when we saw destocking within pharma.
Bernard Birkett: If you go back and look at our margin expansion over 2021 and into 22, a lot of that was driven by HVP growth, and that makes shift, so that shows you the power of the construct we have. And when that biologic engine starts growing again and gets back to normalize levels of growth, we would expect to see that margin start to expand. And you know, first thing is we need to get back to like 3, 2024 levels of margin and then start growing off that. You know, we're confident that will happen over time.
Speaker Change: If you go back and look at our margin expansion over 2021.
22, a lot of that was driven by <unk> people and that mix shift. So that shows you the power of the construct that we have and when.
Speaker Change: <unk> engine starts growing again, it gets back to normalized levels of growth, we would expect to see that margin start to expand.
Speaker Change: First thing is we need to get back to like 2024 levels of margin and then start growing off that.
Speaker Change: We're confident that will happen.
Speaker Change: Overtime.
Unknown Executive: Thank you all.
Unknown Executive: Hop back into you. Thank you.
Speaker Change: Okay. Thank you I'll hop back in queue.
Speaker Change: Thank you.
Thomas Neff: Our next question comes from Thomas or C. Neffron Research. Your line is open. Hi, thanks for taking the question. I just have a question around, I guess, generalized customer behavior in terms of orders. I guess through kind of others that my own pocket market, they speak up are the customers. They say smaller orders more frequently versus maybe physical that have keyed and that have decreased ordering. You've seen a change in how customers are also ordering, or if you expect to go back to them. I apologize. Well, having a little trouble hearing your question. It would it be possible just to maybe move a little closer to the microphone or speak up, please.
Speaker Change: Our next question comes from Thomas <unk> with Nephron Research Your line is open.
Speaker Change: Hi, Thanks for taking the questions.
Speaker Change: I just had a question around <unk>.
Speaker Change: I guess generalized customer.
Speaker Change: In terms of quarters.
Speaker Change: I guess through kind of.
Speaker Change: Sure.
Speaker Change: Thank you.
Pardon me customers.
Speaker Change: Thank you.
Speaker Change: Most recently.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Wondering if you've seen a change in that.
Speaker Change: The birds are also ordering or.
Speaker Change: Okay.
Speaker Change: Tom I apologize, we're having a little trouble hearing your question.
Speaker Change: Would it be possible just to.
Maybe move a little closer to the microphone or speak up please.
Thomas Neff: Sorry, can you hear me? Yes. Thank you. Okay, I apologize. Yeah, my question was, I guess, around, you know, specifically kind of customer orders out of more general in a more general way. We've heard from some companies that bioprocessing supply chain that customers are ordering, doing smaller orders more frequently versus I guess they're typical kind of cadence and was wondering if you would see that he changes at all there. And you know, or whether you expected to kind of go to back this historical kind of timing and cadence there.
Speaker Change: Sorry can you hear me.
Speaker Change: Yes, it's better thank you.
Speaker Change: Okay I apologize.
Speaker Change: Yes, My question was I guess around.
Speaker Change: Specifically kind of customer orders at a on a board general.
Speaker Change: The more general way.
Speaker Change: <unk> heard from sub pumps.
Speaker Change: Some companies that bioprocess egg supply chain.
Speaker Change: They're ordering.
Speaker Change: Doing smaller orders more frequently versus I guess their typical kind of cadence. It was wondering if you could see that he changes at all there.
Speaker Change: And.
Speaker Change: Whether you expect it to kind of go to back to historical kind of timing.
Speaker Change: It's there.
Eric Green: And I'll thank you for the question. And when we look at over pattern right now, as we with our customers, it's more, more in line with the pre-COVID time period. I think if it is different than the during the pandemic period of time and also the last call it end of 2023 going into 2024. And then there's two drivers that won. I think you're pointing out it's more normalized, starting to get to more normalize or stabilize environment. But secondly, if you recall during our pandemic time, our lead times were significantly higher because of the demand on not just the core business, but also on the materials used for the pandemic.
And they'll tell you for the question.
Speaker Change: When we look at the order pattern right now as we with our customers. It's more more in line with our pre Covid time period, I think it is and.
Speaker Change: It is different than the during the pandemic period of time and also on our last call at the end of 2023 going into 2024 and then there's two drivers. One is I think you're pointing out is more of a normalized starting to get to more normalized stabilized environment, but secondly.
Speaker Change: He is as you recall during the pandemic time, our lead times were significantly higher because of the demand on that just the core business. But also also on the materials used for the pandemic when I say that.
Eric Green: When I say that, I am very proud of the team and how they have with the invested capital with the, so with the capacity we have online with multiple sites, particularly on the high value products, we're able to build support customers in a much more timely fashion, if not equal or better than we did pre-pandemic, and give you an idea that's like eight to 12 weeks to make to order. It was highly customized. So, and during the pandemic, we're reaching 40 to 50 weeks. So it is a significant difference. So I just want to highlight that because there's two factors why we're seeing over patterns change.
Speaker Change: I am very proud of the team and how they have with the.
Speaker Change: The invested capital with the so we have the capacity we have online with multiple sites, particularly around our high value products, we're able to.
Speaker Change:
Speaker Change: Bill support our customers in a much more timely fashion, if not equal or better than we did pre pandemic and give me an idea that's like eight to 12 weeks to make to make the order.
Speaker Change: This highly customized.
Speaker Change: And during the pandemic, we are reaching 40% to 50 weeks. So it is a significant difference. So I just wanted to highlight that because there's two factors of why we're seeing order patterns change.
Unknown Executive: One from the market, pharmaceutical supply chain effect and the other one was really are lead times and customers are much more comfortable today and confident in our ability to deliver their product from multiple sites on time each and every each every time that they requested. So hopefully I trust your question, but we are seeing a change. Thank you.
Speaker Change: One from a market.
Speaker Change: Pharmaceutical supply chain effect and the other one was really our lead times and customers are much more comfortable today and confident in our ability to deliver their product from multiple sites on time, each and every each and every time that they requested.
Speaker Change: And just to your question, but we are seeing a change.
Speaker Change: Great. Thank you.
Speaker Change: Thank you.
Speaker Change: Thank you.
Unknown Executive: I'm showing no further questions at this time.
Speaker Change: I'm showing no further questions at this time.
Unknown Executive: I would now like to turn it back to John Sweeney for closing remarks. That concludes the call.
Speaker Change: I'd now like to turn it back to John Sweeney for closing remarks.
John Sweeney: Well. Thank you for joining us today on the conference call an online archive of the broadcast will be available on our website at west pharma Dot com in the investors section. Additionally, you may access the replay for 30 days. Following this presentation by using the dialing numbers and conference I'd provided at the end of today's earnings release.
Unknown Executive: Thank you very much, and have a good day. This concludes today's conference call. Thank you for participating. You may now disconnect.
John Sweeney: That concludes the call. Thank you very much and have a good day.
John Sweeney: This concludes today's conference call.
John Sweeney: Thank you for participating you may now disconnect.
John Sweeney: Hum.
John Sweeney: [music].