Thank you, operator, and good afternoon, everyone. Thank you for joining us on today's call. Our speakers today are Mike Stubblefield, President and Chief Executive Officer and Tom Szlosek, Executive Vice President and Chief Financial Officer. The press release and presentation accompanying this call are available on our investor website at ir.avantorsciences.com. 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 questions. I would like to note that we will be making some forward-looking statements within the meaning of the federal securities laws, including statements regarding events or developments that we believe or anticipate may occur in the future. These forward-looking statements are subject to a number of risks and uncertainties, including those set forth in our SEC filings. Actual results might 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, and 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 discussion of non-GAAP measures. A reconciliation of these non-GAAP measures can be found in the appendix of the presentation. With that, I would now like to turn the call over to Michael.

Thank you, Tommy, and thanks to all of you for joining us today for our second quarter earnings call. I'm starting on Slide 3 with a brief review of Avantor's revenue profile. You've heard me mention before that our business model is very resilient due to our diversified revenue base combined with the customized nature of our solutions. We are well positioned for continued growth in Europe and the Americas, and we are investing to expand our capabilities in the emerging markets throughout Asia, the Middle East and Africa. More than 85% of our business is recurring and approximately half of our revenue comes from proprietary branded products and services. No single customer represents more than 3% of our revenue and approximately two-thirds of our revenue is in attractive life science end markets, such as biopharma and healthcare. Our financial results for the second quarter, which I'll elaborate on in a moment, further substantiate our resiliency. The second quarter was the first to be fully affected by the global COVID-19 pandemic. Our business was adversely impacted by lab closures across the R&D and academic landscape as well as by declines in elective procedures. However, we were able to offset most of the headwinds with new COVID-19-related opportunities in diagnostic testing, vaccine and therapy development and clinical trial support. Moving to Slide 4 and our second quarter business highlights; despite the challenging environment resulting from the global pandemic, our dedication to our customers has not wavered. Our distribution, research and manufacturing sites have remained fully operational. Our broad customer access and extensive portfolio of products and workflow solutions to support patient testing, research and development, clinical trial services and ultimately, the production of approved treatments and vaccines make Avantor an important partner. We are actively working with many of the world's leading pharmaceutical and biotech companies as they develop and test potential COVID-19 therapies and vaccines. Our comprehensive bioproduction portfolio is being leveraged in most of the leading COVID-19 vaccine candidates across all major technologies, including recombinant proteins, viral vectors, mRNA and DNA. Our direct involvement in government-sponsored initiatives, such as Operation Warp Speed in the United States is another proof point of our relevance in the race to combat COVID-19. Of course, the health and safety of our associates who are working at our distribution, research and manufacturing sites remains a top priority. We continue to comply with local statutes as well as guidelines from credible health agencies around personal protection, workplace density, symptom monitoring, and symptom identification and reporting. Our sales, customer service and support personnel continue to work from home throughout the quarter. We have carefully developed plans to return some of these associates to worksites and will begin to implement those plans in the third quarter as local conditions permit. Our second quarter results reflect the power of our operating model in even the most challenging conditions. Reported organic revenue declined only 2%, including COVID-19 tailwinds of approximately 500 basis points to 600 basis points. Despite the organic revenue decline, the resiliency of our model enabled us to expand our adjusted EBITDA margins by 94 basis points, grow adjusted earnings per share approximately 33%, and continue our strong cash generation. Earlier this month, we refinanced $2 billion of our high-interest debt, which will result in cash interest savings of more than $90 million per year. As part of the refinancing, we also extended our liquidity by doubling the size of our revolving credit facility. Our improving balance sheet and favorable outlook resulted in another credit rating upgrade, giving us the opportunity over the next few quarters to further reduce interest costs by lowering the rates on the remaining $3 billion of debt. Our mission drives our deep sense of purpose to create a better, more sustainable world, and our teams have been actively engaged in improving the transparency of our Environmental, Social and Governance, or ESG reporting. We are pleased to have published our 2020 corporate social responsibility benchmark report and look forward to sharing more information about our ESG priorities in the coming months. We've also taken a number of recent actions to reinforce our commitments to providing a positive work environment where all associates feel respected and have an equal opportunity to contribute and succeed. There is no place for racism, prejudice or hatred of any kind, and we're actively focused on making the company a role model for diversity, equity and inclusion. Turning to Slide 5 of the presentation. I'd like to share a few financial highlights from the quarter. Organic revenue declined 2% as COVID-19-related headwinds in our education, healthcare and applied end markets more than offset continued high single-digit growth in our biopharma business, where demand continues to be strong globally, especially in bioproduction, where we realized more than 20% growth in the quarter. Included in our results are approximately 500 basis points to 600 basis points of COVID-19-related tailwinds as we realized incremental revenue associated with higher sales of PPE, qPCR testing kits, qPCR reagents and consumables, serological test kits, and the proprietary materials being used to support vaccine and therapy development. Adjusted EBITDA in the quarter was up approximately 3% on a constant currency basis, and adjusted earnings per share increased approximately 33% to $0.19 per share. We continue to generate strong cash flow with first half free cash flow up over $300 million from 2019, enabling continued reduction in our net leverage to 4.3 times EBITDA down from 4.6 times at the beginning of the year. We remain committed to continue deleveraging as we approach our target leverage range of two times to four times EBITDA. As I prepare to turn the line over to Tom to discuss the financials in more detail, I want to emphasize that Avantor's mission of setting science in motion to create a better world is more relevant now than ever before and our second quarter and first half 2020 results are evidence of the mission-critical role we play in supporting our global customers. We are well positioned with a highly recurring revenue base, deep customer access, significant exposure to attractive end markets like biopharma and a strong culture of execution enabled by the Avantor Business System. With that, let me turn it over to Tom.

Thank you, Michael, and good afternoon. Let's start on Slide 6. Organic revenues declined 2% in the quarter, which, as Michael mentioned, includes the 500 basis point to 600 basis point tailwind from COVID-19 related to PPE, diagnostic testing, vaccine and therapy development and clinical trial support. These tailwinds were more than offset by the pandemic-driven headwinds, including in our education & government business, reflecting the widespread academic lab closures. We also experienced impacts from commercial lab closures as well as declines in our healthcare business, reflecting temporary declines in elective surgical procedures and in our industrial businesses. Looking at growth from a regional perspective, the Americas, which represent approximately 60% of global sales, reported a 6.7% organic revenue decline in the quarter. The region's sales were impacted by academic and commercial lab closures, fewer elective procedures performed by customers of our healthcare business, and a broad reduction in sales of equipment and instrumentation. Biopharma production and clinical services were bright spots for the Americas, each growing double digits. Europe, which represents approximately 35% of global sales, reported 3% organic revenue growth, driven by the strong performance in the biopharma and healthcare end markets, offset by COVID-19 related declines in the healthcare, education and industrial end markets. The stronger second quarter growth rate in Europe versus the Americas reflects the lower exposure in Europe to academic labs and elective procedures and a higher participation rate in the COVID-related testing opportunities. EMEA, representing approximately 5% of global sales, reported an 18.2% organic revenue increase. Revenue growth was driven by the biopharma and advanced technology and applied materials end markets. Slide 7 shows our organic revenue growth by end market and product group for the quarter. What is notable on this slide is the two areas where we achieved high single-digit growth in the quarter; the biopharma end market on the left side of the slide and the proprietary product group on the right side. These are our most significant and higher profit categories and their continued strength, despite the overall modest sales decline, was a big factor in the nearly 100 basis point expansion in adjusted EBITDA margins for the quarter. Biopharma, representing approximately 50% of our revenue, once again, experienced high single-digit organic revenue growth. Strength came from our biopharma production platform including single-use solutions, production chemicals, personal protective equipment and clinical services. Healthcare, which represents approximately 10% of our revenue, declined high single-digits, impacted by a reduction in elective procedures and routine clinical diagnostics. Education and government, representing approximately 15% of our revenue, experienced organic revenue declines of over 20%. This end market was impacted by the full or partial closure of academic and government research labs, and K-12 schools for the majority of the quarter. Advanced technologies and applied materials, representing approximately 25% of our revenue, experienced mid-single-digit organic revenue decline. Economic weakness impacted our industrial segments with modest offsets in our non-industrial segments, including solid growth in the electronic materials business. By product group, proprietary materials and consumables experienced high single-digit growth, with strength in the Americas and EMEA. Services and specialty procurement declined mid-single digits, impacted by lower demand for our specialty procurement services. Equipment and instrumentation was down mid-teens, reflecting capital expenditure investment declines across our customer base. In July, the biopharma momentum has continued with strong growth in lab products and biopharma production. We are actively engaged with our supplier partners and customers on offerings to support diagnostic testing, vaccine and therapy development and clinical trials. For the other end markets, the COVID-19 impacts we experienced in the second quarter have moderated slightly. Labs in the academic end market have slowly started to reopen. We also expect modest sequential improvement in healthcare as elective procedures slowly resume. The industrial portion of the advanced technologies and applied materials end market also continues to see modest improvement. Considering these factors, we expect July's revenues to be approximately flat or grow low-single-digits versus 2019. However, given the ongoing uncertainties around the intensity and duration of the pandemic, we will continue to refrain from issuing guidance.

Turning to Slide 8; let me start with our second quarter adjusted EBITDA. Excluding foreign exchange, we achieved 3% growth in adjusted EBITDA and 94 basis points of reported margin expansion. Key drivers of the performance were commercial excellence; favorable mix, including strong growth in biopharma production and proprietary offerings; productivity; and continued discretionary cost containment. Free cash flow improved nearly $100 million to $76 million, reflecting stronger adjusted EBITDA, better working capital performance and lower interest and tax payments. First half free cash flow generation of $316 million or 136% of adjusted net income was seven times the prior year amount. We are on track to achieve or beat our original full year free cash flow guidance of $450 million to $500 million, recognizing that guidance has since been withdrawn. Finally, we reported approximately 33% growth in our adjusted earnings per share for the quarter, primarily reflecting strong operating performance, the ongoing reduction in interest expense from our deleveraging, and the improvement in our income tax rate. For the first half of 2020, we grew our adjusted earnings per share 46% to $0.36 per share.

Slide 9 has our segment results. Americas reported 210 basis points of improvement in adjusted EBITDA. Key drivers include commercial excellence, favorable mix driven by a higher proportion of growth in proprietary materials and consumables, productivity, and strong discretionary cost containment. The first half 2020 adjusted EBITDA margin expanded 90 basis points. Europe recorded 120 basis points of improvement in adjusted EBITDA. Key drivers include volume growth, commercial excellence, favorable mix, productivity and strong discretionary cost containment. First half 2020 adjusted EBITDA margin expanded 80 basis points. EMEA reported 330 basis points of improvement in adjusted EBITDA. Key drivers include volume growth and favorable mix. First half 2020 adjusted EBITDA margins declined 60 basis points. Let me move to Slide 10. In this environment, we occasionally receive questions regarding liquidity. Like we did in the first quarter, we are providing a brief summary of our liquidity. You see on the left half of the slide, our liquidity as of December 31st, 2019, and at June 30th, 2020. The June numbers are shown on a pro forma basis to reflect the July refinancing. As part of the refinancing, we more than doubled the size of our revolving credit facility to $515 million. Recall that in the first quarter of 2020, we expanded our receivable securitization line by $50 million. These facility enhancements and the continued free cash flow generation of the business have enabled a greater than 70% increase in our overall liquidity to $1,037 million, roughly 100% of our adjusted EBITDA, which is in line with our peer group. Both of these facilities remain undrawn. We have no significant debt maturities, and we have a capex-light business model. To summarize, our liquidity and cash flow continue to get even stronger, and we are committed to deleveraging even in these challenging market conditions. Since the beginning of the year, we have reduced leverage from 4.6 times EBITDA to 4.3 times. I'm now on Slide 11, which summarizes our July debt refinancing. We recently received approval from our Board to execute a comprehensive strategy to lower the cost of our $5 billion debt portfolio while preserving the existing covenant-light and minimal principal service requirement features. This is a continuation of our move toward an investment-grade capital structure, typical of a large-cap public company. After the first six to eight weeks of the pandemic, the high-yield debt markets began to turn in our favor. Shortly after the July 4th holiday, we launched a $1 billion U.S. debt offering and a EUR400 million debt offering to replace, in part, the $2 billion 9% unsecured notes that were issued as part of the VWR acquisition in 2017. Each of the tranches offered was significantly oversubscribed and we're able to upsize the U.S. dollar piece, allowing us to replace the entire $2 billion in unsecured notes, and achieve a composite coupon rate of less than 4.5%. This refinancing will generate close to $90 million of interest savings per year and results in a lowering of the weighted average cost of our entire debt portfolio by approximately 180 basis points. We incurred approximately $180 million in one-time cash costs, which will be recovered within two years under the new financing. In the third quarter, there will be a one-time charge to reflect the costs incurred on the early extinguishment of the 9% unsecured notes. We continue to monitor the remaining $3 billion of the debt portfolio for refinancing opportunities.

Thanks, Tom. I'm on Slide 12. We executed well in a challenging environment, and our top line performance, strong EBITDA growth, outstanding cash generation, and continued deleveraging reflect the resiliency of our business model. Our ability to complete a debt refinancing in a challenging time like this highlights the value of our highly recurring revenue base, broad mission-critical product portfolio, and exposure to attractive end markets like biopharma. While the uncertainty associated with the current pandemic continues to make forecasting difficult for parts of our business, our long-term growth strategy remains intact, and we are steadfast in our commitment to help our customers combat this coronavirus by supporting ongoing initiatives in testing, vaccine and therapy development, and ultimately, in 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 and investment in Avantor and for your ongoing support. I will now turn it over to the operator to begin the question-and-answer portion of our call.

And our first question comes from Tycho with JPMorgan.

Hey, thanks. Michael, the 500 basis points to 600 basis points COVID tailwind for this quarter, can you just talk about where that's coming relative to the 50 basis points to 100 basis points last quarter? Is it incremental products? Can you just provide a little bit more color on what's driving the step-up?

Yes, good evening Tycho. Thank you for the question. We're experiencing positive momentum in several areas. We continue to see strong demand for personal protective equipment, although our supply chain in that area is constrained and we're unable to meet all the incoming demand. However, we're seeing some contribution from additional PPE sales. The more significant momentum is coming from our efforts to support COVID testing, as well as the development of vaccines and therapies. We are actively involved in supplying a wide range of materials for the entire qPCR workflow and lateral flow serological tests. Our proprietary materials portfolio is extensively used in the development of various vaccines across all four major technologies leading the race for a cure. We are well-positioned in this area and gained substantial traction in the second quarter.

And then a follow-up just on EBITDA margins. Obviously, nice improvement despite the top line this quarter. Can you just talk a little bit about the levers, how much of this was VWR synergy versus other factors and sustainability going forward?

Yes. Hey Tycho, it's Tom. I'll take that one. When we look at the 94 basis points, it was a combination of factors. The more significant ones continue to be the mix dynamic that we talked about. In the quarter, we had lower instrumentation and equipment sales along with other specialty equipment sales, but in replacement, we saw better sales in some of our higher-margin offerings. Michael mentioned a few of them, particularly on the biopharma production side, which was a definite tailwind for us. We're also doing a really good job managing the price versus COGS inflation dynamic and received a bit of a tailwind there. Additionally, overall productivity, including discretionary cost control, played a role. With nobody traveling, that helped us, but there are several other discretionary categories we've been careful with across the landscape. I'd say those are the biggest drivers.

Okay, thanks guys.

And our next question comes from Derik with Bank of America.

I was wondering, when comparing the first quarter to the second quarter results, the Americas showed a bit stronger performance in the first quarter and a bit weaker in the second quarter. Were there any stocking issues or pull forwards in this? I'm considering the dynamics between the two, as I asked a similar question last quarter. Do you have any additional insights on this? This also leads into my question about how we should view the split between the Americas and Europe as we move into the third quarter.

Thank you, Derik. When comparing the performance in the Americas from the first quarter to the second quarter, it's important to note that the pandemic's impact was mainly felt in the last 10 days of the first quarter. The pandemic initially began in Asia, spread to Europe, and only later affected the Americas. Consequently, the impact during the first quarter was relatively modest, particularly in the education and higher education sectors. As we moved into the second quarter, however, the pandemic fully affected our results, with April being the toughest month due to significant challenges. More than half of the lab work in universities was halted, elective procedures were delayed, and routine clinical diagnostics decreased. There was also a smaller impact on biopharma research and development during this quarter. Therefore, I wouldn’t attribute the differences in inventory levels as a factor in the comparison; instead, the disparity is largely due to the extent of the pandemic's impact in April compared to the limited exposure in the first quarter.

I have a follow-up question regarding your July trends. You mentioned a modest improvement to your base, but can you address the tailwinds from the 500 to 600 basis points of COVID impact in the second quarter? Should we expect a similar level of impact in the third quarter?

Yes. When you look at the categories, we outlined for Tycho around where we're seeing tailwinds, whether it'd be PPE or testing or vaccine therapy development. We're also doing a fair bit of support through our clinical trial services business in supporting the trials associated with the vaccine development. We've certainly seen each of those categories carryover with some strength into July.

But no comment on whether it's too early to know if it will be the same magnitude. I'm just reflecting on what other companies have reported, as their organic revenue growth related to COVID has been significantly higher than we anticipated.

In July, we've likely observed a similar trend. Clearly, there has been an increase in the number of tests being conducted nationwide. As we move forward day by day, many of these vaccines are advancing towards late-stage clinical trials, which is increasing demand and volume. It seems that these fundamentals will remain with us for the foreseeable future.

Yes. I mean that safety category is, we're on allocation with our customers and suppliers. So there continues to be significant demand there. You might mention that as one of the factors. And like you said, on the biopharma production side as well, where we saw some good tailwinds, our backlog or open orders is very, very strong. It's up significantly. So we're continuing to see the demand pulls in those tailwind areas that you mentioned.

Great. And then just one housekeeping, FX hit to the top line for 3Q and the full year?

Yes. Well, I mean, it's kind of tough with the way the FX rates have moved in the last two weeks. So we're continuing to look at it just on an organic basis and we try and normalize that. Derik, maybe we can do some follow-up on that. But right now, the situation is a bit volatile. So it's tough for us to predict exactly what the FX impact is going to be for the full quarter, when we're not giving guidance on the full quarter.

And our next question comes from Vijay with Evercore ISI.

Thank you for taking my questions and congratulations on the solid execution. Mike, I have a bigger picture question for you. Regarding the July guidance, or rather the expectation for flat to up low singles, does that take into account the COVID tailwinds, or is that just for the base business? Also, you mentioned some comments regarding the vaccine. Are we at a point where we can explore the longer-term opportunities related to the COVID vaccine and its implications?

Yes, Vijay, thank you for joining the call tonight. Regarding your first question about the quarter and specifically July, I can provide some insight, even though July has not yet concluded. Based on a few remaining days, we expect growth to be flat to low single digits, including any positive effects we are observing in the business. In response to your second question about the vaccines and whether it's too early to discuss their potential impact, it is indeed a bit early, but progress is being made rapidly. Looking at the leading candidates and even some of the secondary ones, there is significant promise in various vaccine types such as recombinant vaccines, viral vector vaccines, DNA vaccines, and the Moderna mRNA vaccine alongside Pfizer. In our bioproduction portfolio, we will be involved in all these areas. As mentioned in my prepared remarks, we are engaged in all major programs and actively involved in the planning activities of various governments monitoring these developments. We're fully engaged in supporting our customers in this endeavor. When considering the potential impact of these vaccines, several factors come into play, including the number of doses required for effectiveness and the total patient population to be treated. The addressable market we are looking at will vary significantly based on which therapy proves successful. At a minimum, we could see tens of percent added to our addressable market for bioproduction, and at the maximum, we might even double or more our addressable market. Therefore, there is a wide range of possible outcomes, which should start to become clearer in the coming months as we receive feedback from the Phase III clinical trials and determine which vaccines are likely to reach the market first. We are confident that we will play a crucial role in this space and have a broad impact, and we are optimistic about our contributions.

And then Tom, one last quick free cash question for you. That's a monster number. I'm just curious, are there any one-off timing related elements that is impacting your free cash flow? What's driving it and does the debt refinancing, does that improve free cash flow here? Thank you.

Thank you for the question, Vijay. Your connection is a bit choppy. In terms of the first and second quarters combined, we've had a very strong performance in the first half, exceeding $300 million in free cash flow, approximately $320 million. Our initial guidance was between $450 million and $500 million, so we are at about 60% of the higher end. This performance has been largely driven by improved working capital management. Looking ahead to the second half, there are additional positive factors coming into play. The refinancing has significantly reduced our interest expenses, decreasing our full-year run rate by $90 million, with nearly half of that expected in the second half. We're also seeing better outcomes on tax, thanks to the CARES Act provisions allowing us to deduct interest costs from 2020 and 2019. Our management of certain refund applications is also yielding results, leading us to believe that tax will continue to be a strong contributor for the second half. We're optimistic about sustaining our momentum. If we can maintain flat to low single-digit growth as discussed in July for the second half, this could potentially double our cash for the full year. It's crucial that we keep managing working capital effectively, and if all these factors align, we should continue making progress.

And our next question comes from Doug with Cowen.

Good afternoon. Thank you for taking my questions. I want to follow up on Vijay's initial question regarding vaccines. It appears that it's still too early for you to estimate the vaccine opportunity in financial terms due to various uncertainties. However, could you confirm that you believe vaccine production will significantly boost growth in your bioproduction business compared to the already strong recent trends, especially with new developments happening? It seems to us that bioproduction could continue to grow over 20% year-over-year for the next year or even longer. I want to ensure we're aligned in our understanding.

Yeah, Doug. Good evening and thanks for the question. Yes, I think, generally, you're thinking about it correctly. When you look at the tailwinds that we've seen in the second quarter within the vaccine area, you got to keep in mind, most of that is or all of that is within just the process development and early phase clinical trial support, which you're talking relatively modest number of doses that we're supporting. And just given the breadth of our coverage here, the number of programs we're going to have exposure to most of the nearly 200 programs that are out there across the main technologies that are coming through here, I think it is reasonable to assume that when one of these hits or whichever one ultimately comes through, that it will have a meaningful impact on the business. When you look at our open order report, for example, and Tom referenced it. But since the pandemic hit, our open orders, as we sit here today, are up more than 40% and growing. And so we're seeing a tremendous pickup in the business. We drove more than 20% growth in the quarter, and I think we see that certainly continuing through July. And when you look at the strength of the order book, I think we're optimistic about where this is headed.

Okay, that is super helpful. And then, moving down the P&L, gross margin increased 120 basis points year-over-year in the quarter, as you know. How much of the increase was driven by higher proprietary product mix? And then looking to the second half, assuming bioproduction and your other proprietary products continue outperforming and then just layering in the fact that, again, bioproduction is higher margin, is 33% a reasonable floor or is that even too low as you think about the rest of the year?

Yes. There are several factors at play here. The growth of our proprietary materials, which saw a high-single-digit increase, significantly contributed to the margin expansion we observed in the quarter. This was also supported by the headwinds in our business, specifically from some of the lower margin components of our portfolio, including our equipment and instrumentation offerings as well as our services platform. Thus, we benefited from strong growth in the part of our business that has the highest margins, while the challenges were mainly in the lower margin areas. We anticipate ongoing strength in our proprietary offerings, which will help maintain the margins. However, it is important to note that as we see improvements in markets like education and healthcare, along with some of our applied markets, we may start to reintroduce some lower margin components of our portfolio. This could somewhat temper the strong performance we are currently experiencing in our proprietary offerings.

Yes. At some point, we will return to some of the discretionary costs that we need to invest in. People will come back and want to meet with customers and incur a bit of travel and entertainment expenses. This will be a factor we need to consider as we move forward.

Okay. And Tom, if I could just sneak in one last one. Congrats on the refinancing, your highest cost cut. As you know, you still have a $1.5 billion slug of debt at 6%, well above where you recently refinanced. Why wouldn't you refinance that debt as well over the next six months or so? And to be clear along those lines, does 2020 and 2021 interest expense guidance assume any incremental refis? Thank you.

Right. Regarding your second question, there are no additional refinancing benefits from what we've outlined in the interest expense chart going forward. As for your first question, when we reevaluated our capital structure during COVID, we were quite concerned about how the rates were affecting us. High-yield rates were approaching 7% or 8% on the debt instead of getting better, so we decided to pause. Fortunately, over time, the high-yield segment started to improve for us as we collaborated with our partners, who played a crucial role in executing our plans. That was a positive outcome. For other parts of the debt market, they haven't yet reached pre-COVID levels and are beginning to stabilize, but this will take some time. We intend to work closely with our treasury team and advisers to position ourselves to address the higher-cost debt segments, although the exact timing is uncertain and will depend on market conditions. When we review our entire debt portfolio with our Board and consider potential refinancing benefits, I estimate that more than two-thirds of the advantage was in the unsecured debts we have already refinanced. Therefore, I don't want to suggest that we will be able to achieve another $90 million in annual savings. While any further savings will be significant, I believe we've captured most of the benefits in the initial refinancing. We will continue to work on addressing the remaining debt segments over the next six months, possibly sooner.

And our next question comes from Jack with Nephron Research.

I was hoping you could provide more details on your expectations regarding the pace of academic, government, and lab reopenings in the second half of the year. You are one of the companies that has historically noted exposure to K-12 sectors. Can you help us quantify what that represents and how it may be affected by COVID-19?

Yes, Jack, I'm happy to address your question. The academic market has been significantly affected by the pandemic, likely more than any of our other markets. We reached a low point in April, where less than 20% of scientific capacity was operational. Since then, we've seen gradual improvements throughout the quarter, and this positive trend has continued into July, although we are not yet back to full capacity. We track not only the number of labs that have reopened but also how much of their capacity is being utilized. We are encouraged by the innovative strategies our customers are implementing, such as shift schedules, to maximize laboratory use. We are actively supporting our customers' efforts to restart and advance their operations. It's important to note that the return of scientists to the lab is a separate issue from whether students return to campuses in the fall. Our initial expectations about this are materializing. For instance, our numbers in Europe are somewhat ahead of those in the U.S. due to the timing of the recovery, and we are optimistic about the momentum in Europe. While we are not yet at full capacity in the Americas, there is a steady improvement week by week.

Great. And then, I guess, with the combination of the refinancing which took place, and the outlook seems to be a little brighter today. Does it change the way you think about the pace of M&A? And maybe just give us an update on how progress has been at building out the strategic development team?

Yes. It's a great question. We've been focused and continuing to be focused as a priority of taking our leverage into kind of the target range of two times to four times, and we're getting very close. Knowing that M&A isn't necessarily a linear event, we kind of at the end of last year, early in the first quarter, started to rebuild our team, put in place all of our processes and cadence, and rhythm with our Board and we have been active throughout the year in building a pipeline, engaging in a number of discussions, and we continue to be active in that regard. Certainly, the acceleration of cash flow and the strength of our cash flow generation is encouraging, when you look at the outlook for cash flow generation, taking into account the improvements that we're making in the business and particularly the financing costs, we think we are well positioned to start to turn this part of our growth strategy on. Now having said that, we'll be disciplined about it. And I think we're really focused on bringing in more proprietary technologies. We're very focused on looking at ways of strengthening our bioproduction offering, looking at ways of strengthening our life sciences portfolio within our lab workflows and continuing to be opportunistic about extending our capabilities into Asia. So I think the filter is pretty clear that we're applying and as we sit here at the end of July, certainly the size of the funnel and sophistication of the funnel is certainly far greater than it was, say, when we spoke 90 days ago. And so it's getting a lot of our attention and we're anxious to put capital to work in that area.

Yes. The one thing I'd mention on that, Jack, I mean going back to the refinancing. I mean that has moved our weighted average cost of capital, which obviously is a factor in our M&A consideration. I think that will make us more competitive in the way we pursue some of these deals.

Our next question comes from Patrick with Citi.

Great, thanks guys. Maybe just one on the industrial market trends. Just curious in terms of what you guys are seeing there on the more macro sensitive areas, your confidence in the outlook going forward, seems like sentiments bottomed a bit in 2Q and then maybe we're on the way back up. But wondering what you guys are hearing from the customer base there and the visibility for the next couple of quarters?

Yes, it's a good question. So anyway we've been focused on. I think when you look at our applied markets, as we've said before, it's roughly 25% of our business. Half of it is pretty sensitive to the macro environment. And so as you suggest, as we've seen the recession hit, that part of the portfolio has certainly been impacted the most and certainly off double digits. The other half of that end market is in more kind of defensive growth-oriented applications, probably headlined by our exposure to the semiconductor space, which we play in a relatively unique way, and we continue to see nice growth momentum in that end market. But in things like oil and gas and petchem that were really hardest hit by the pandemic, we do see some modest recovery starting to come back into the business. And I think when you look at the platform as a whole, given the depths of the pandemic and the recession to have the platform off mid-single digits in the quarter. I do think that highlights just how diversified that part of our business is and how many levers there are to kind of keep that moving towards a positive direction. So I think we're encouraged by some of the factors we're seeing still, I think, net-net, we're probably still experiencing some headwinds in the month of July, but are hopeful that we'll see the trend continue.

Makes sense. And then maybe one for Tom, just on the margin side, certainly encouraging the progress so far. Along with the internal initiatives you guys are doing, can you just help us think about the mix shift going forward? Again, things like vaccines have obviously been highlighted quite a bit here tonight. What's the mix look like as you look out a couple of quarters? Is that going to continue to trend higher on the margin side?

Yes, if I had more specifics, I would probably provide guidance. Not to come across as overly confident, but the factors we've experienced this quarter have contributed significantly to our EBITDA improvement. This includes around 20% growth in areas such as biopharma production, paired with a slowdown in equipment and instrumentation, which is a trend seen in the tools sector. If we see a resurgence in these areas in the second half of the year, particularly in the third and fourth quarters, it may temper the margin expansion that we currently enjoy from these higher growth sectors. It's a challenging situation to predict right now due to its substantial impact, and we will keep monitoring it and updating you as necessary.

And our next question comes from Brandon with Jefferies.

Hi, thanks. Good afternoon. Mike, back on the bioproduction business, are you capacity constrained there at all or are you seeing any areas where maybe you got competitors that are seeing out of stocks and you've been able to actually capture some share?

Yes, Brandon, thanks for the question. Within the bioproduction space, we do have a relatively broad and unique offering. And as we sit here today, supporting the clinical trial work, I think we're doing a pretty good job keeping up with really unprecedented demand that we're seeing in the business. I think where we spend our time on this topic, Brandon, is trying to project forward and obviously, it's a pretty complex equation. When you look at the number of programs that are in-flight that we're working on all different technologies and each leveraging certain portions of our portfolio. As an industry, we're facing really unprecedented potential demand, if you think about trying to provide a vaccine for the globe. But at least as we sit here at the moment with what we know appears that it's not going to be one dose per patient, but it looks like it's trending towards multiple doses and probably annually. So I think capacity is definitely going to be an issue for the industry, as things start to move into commercial production across various elements. And I think we're all trying to figure out how you prioritize those bottlenecks and how you can get creative and bring capacity to the market to support as much production as possible. So I probably wouldn't look at it so much in terms of near-term market share gain. I think the way we think about it is probably looking ahead at where the bottlenecks inevitably going to be for all of us, just given the volumes that we're talking about here, it is going to stress the manufacturing capabilities and we're going to have to be pretty creative in how we debottleneck and how quickly we can make the capacity available.

Thanks. And then, a follow-up for Tom. In terms of the COVID tailwinds of 5% to 6% in the second quarter. I'm curious if the exit rate in June was actually higher than that, if that scaled up through the quarter? And any chance you could share with us the impact of those tailwinds by geography between Americas and Europe, quantify those specifically?

Overall, our exit rates in June were positive compared to the entire quarter, likely due to further progress on the tailwinds and a slight easing of the headwinds. This positive momentum appears to be continuing into July. As for the current mix of tailwinds, while we can't be certain, it seems to align with the pace we experienced in the second quarter. In terms of regional tailwinds, Europe showed a slightly stronger growth rate, but it wasn't a major factor in the overall growth differential. Instead, we faced more significant headwinds in the Americas, primarily due to a higher concentration of academic and educational institutions, as well as a larger share of our biomaterials business in the healthcare sector.

And our next question comes from Dan with UBS.

Thank you for taking my questions. I joined a bit late, but I caught up on the notes. I'm curious, although there is no guidance for Q3 or the second half of the year, could you provide some insights? I know you shared detailed information on July trends and exit rates. Considering the repeatability and consumer focus of your business, is there any way you could provide a general idea of what to expect for Q3?

Yes, thank you, Dan. As Michael mentioned and as we indicated in our prepared remarks, the exit rates in June have continued to improve and have accelerated into July. We believe it’s reasonable to state that we expect flat to low single-digit growth, and I would prefer not to make more specific forecasts for August and September. There are various factors at play beyond just COVID, such as seasonal vacations and shutdowns, and we are not entirely sure how these will impact the current environment. The unpredictability of the duration and extent of these factors, especially in light of what we are observing, makes it challenging to discuss demand patterns beyond what is immediately apparent. Our business operates with a low backlog, except for biopharma production, meaning most orders are fulfilled within 24 to 48 hours. This puts us in a situation where we are confident in our ability to reorder as things normalize, but accurately predicting the timing and exact range of that is difficult.

Got it. No, Tom, that makes sense. And then I know there's been a bunch of questions on the vaccine. But on the testing side, for COVID, I think Brandon asked about capacity on your kind of biologics part of the business. But on testing, I think expectations are for testing to continue to ramp in the back half, certainly in the U.S. maybe globally. How are you positioned if that does occur from an ability to benefit from that? You didn't quantify within your COVID contribution, how much testing was of that, did you?

We did not quantify that, but it is significant. I would like to mention a few things about it. First, if we look at the widespread PCR-based testing that is currently taking place and consider the entire workflow from sample collection to RNA extraction, purification, reaction setup, and the actual testing, we will play a vital role in every phase of that workflow with a broad portfolio. As testing has increased throughout the quarter, we expect that testing will remain an important aspect of our lives going forward. I believe we are well positioned to continue to build on our current position and engage in the additional testing that has been emerging.

And that is our final question for today.

Yes. Thank you, operator, and thank you all for participating in our call today. As we close, I want to express my gratitude and admiration for all of our associates around the world who continue to live our values and work tirelessly to support our customers as they navigate the COVID-19 pandemic and seek solutions to protect, detect and treat the virus. Our associates' passion and dedication to our mission on setting science in motion to create a better world really does position us to help bring life-changing therapies that can improve patient outcomes for people across the world. I'm optimistic about what lies ahead for our business and look forward to updating you at the end of the third quarter. Until then, take care and be well, everyone.

And that does conclude today's conference call. Thank you for your participation. You may now disconnect.