Avantor, Inc. Q1 FY2021 Earnings Call

Good afternoon. My name is Annie, and I will be your conference operator today. I would like to welcome everyone to Avantor's First Quarter 2021 Earnings Results Conference Call. I will now turn the call over to Mr. Tommy Thomas, Vice President of Investor Relations. Mr. Thomas, you may begin the conference.

Thank you, operator, and good afternoon, everyone. Thank you for joining us on today's call. Our speakers today are Michael Stubblefield, President and Chief Executive Officer; and Tom Szlosek, Executive Vice President and Chief Financial Officer. A press release and a presentation accompanying this call are available on our investor website at ir.avantorsciences.com. A replay of this webcast will also be made available on our website after the call. Following our prepared remarks, we will open up the line for questions. During this call, 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. 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 to the presentation. With that, I will now turn the call over to Michael.

Thanks, Tommy, and good afternoon, everyone. I appreciate you joining us today. I'm starting on Slide 3. Avantor's first quarter results provide a terrific start to the year and underscore the value of our fully integrated business model and the relevance of our diversified portfolio. Driven by the Avantor business system, we delivered strong results across all core financial metrics. We achieved 13.5% organic revenue growth, and our core growth rate, excluding COVID tailwinds, improved for the third consecutive quarter. We continue to play a critical role in providing solutions and services to support the global response to the COVID-19 pandemic. And these COVID tailwinds accounted for approximately 700 basis points of growth in the quarter. We realized substantial EBITDA growth, expanded margins more than 300 basis points, and more than doubled adjusted EPS. Additionally, our leverage position continues to rapidly improve, and we received upgrades from all three rating agencies in the quarter. On April 12, we announced a definitive agreement to acquire Ritter GmbH and its affiliates, a technology leader in high-precision consumables, expanding our proprietary offering for diagnostic and drug discovery workflows. I will share more details about the transaction in a moment. We continue to actively invest in biopharma production capacity, supporting our core business as well as COVID-19 vaccine production. This quarter, we advanced several important expansion initiatives, including projects at our Morrisville, North Carolina, and Devens, Massachusetts, facilities. We're also adding a second European single-use facility in the Netherlands. In total, we will increase our single-use manufacturing footprint by 30% and double our cleanroom space in the United States and Europe. We remain focused on driving innovation and growth across our core businesses. And recently enhanced our bioproduction offering with the launch of J.T.Baker BAKERBOND chromatography columns to support downstream protein purification. These new columns have unique selectivity and enable higher purification performance across a wide range of platforms. Consistent with our integrated discovery to delivery model, Avantor resins are available to support scientists from early phase discovery to full-scale production and will drive long-term recurring revenues across multiple biopharma therapies. In our Advanced Technology platform, we created a unique space-grade silicone formulation that was used on the Lockheed Martin aeroshell, which helped protect NASA's latest Rover Perseverance during the descent into the Martian atmosphere earlier this year. Our silicone materials performed a critical role in protecting Perseverance from extreme heat and particulate contamination, a great example of our proven ability to customize solutions for the most stringent and demanding applications. Looking forward, we expect our end markets to steadily improve throughout the year. Growth in April has kept pace with the first quarter, and the order book in our longer-cycle businesses, including biopharma production, continues to grow. Based on these favorable market dynamics and our strong first quarter performance, we are raising our full year revenue, EBITDA, and EPS guidance. We will share details on this in a few minutes. Moving on to Slide 4. I'd like to reiterate some of the highlights from the announcement of our definitive agreement to acquire Ritter GmbH and its affiliates. Ritter is a fast-growing technology leader in high-precision consumables for automated liquid handling in clinical and research applications. We've noted in prior presentations that M&A offers opportunities to accelerate growth, enhance our portfolio of proprietary offerings and ultimately provide more comprehensive, workflow-driven solutions for our customers. In that context, Ritter's platform is an excellent strategic fit with Avantor as it addresses all these dimensions and applications and end markets that we know well. Additionally, our combined business shares similar characteristics, including a highly recurring specification-driven revenue profile. One important element of this acquisition is the attractive end market dynamics and the addition of approximately $7 billion in total addressable market in application areas such as clinical diagnostics, drug development, and clinical trials. We're excited to bring together Ritter's proprietary offerings and manufacturing capabilities with Avantor's broad reach and deep customer relationships to generate incremental growth and margin expansion. The transaction is expected to close in the third quarter, and we anticipate that it will be immediately accretive to adjusted earnings per share. For further information about the acquisition, please see the recorded presentation on the Investors section of our website. Turning to Slide 5 of the presentation. I'd like to summarize our first quarter financial results. Organic revenues increased 13.5%. All regions and all product groups experienced double-digit organic growth. Overall performance continues to be driven by our biopharma end market, where organic revenue growth once again exceeded 20%. We are encouraged to see several leading indicators that point to the ongoing recovery of our end markets, particularly in the United States, including the resumption of clinical trial activities, the return of scientists and researchers to R&D labs, and the rebound in elective surgical procedures. Importantly, our elective procedure-related revenues returned to pre-pandemic levels in the quarter. COVID-19 related tailwinds contributed approximately 700 basis points of revenue growth. We play a critical role in providing solutions and services to support COVID-19 testing workflows, head-to-toe personal protective equipment, and customized materials needed to produce vaccines and therapies. There was continued demand for our testing and PPE solutions during the quarter, and we realized a significant step-up in the contribution from our support of vaccine production. We are proud to play a role in the global COVID-19 response, and we see opportunities to participate in future mRNA and viral vector-based vaccines and therapies for other applications. Adjusted EBITDA in the quarter was up 38%, leading to adjusted earnings per share growth of 101% to $0.35. Our EBITDA margin growth continues to reflect the impact of volume growth, productivity, and the favorable mix from our proprietary offerings. Tom will provide more details on adjusted EBITDA and EPS growth in just a few minutes. We generated $112 million in free cash flow in the quarter and are reiterating our full year free cash flow guidance of over $800 million. Our cash performance and earnings momentum enabled a reduction to our adjusted net leverage from 4x EBITDA at the end of last year to 3.5x EBITDA at the end of the first quarter. We now expect our leverage to remain under 4x throughout the year, even after we close on Ritter. You will recall that our long-term target is 2x to 4x EBITDA. In summary, our results reflect our resilient portfolio, relevant market position, and unwavering focus on execution. As always, we remain committed to building trusted and collaborative relationships with our customers and driving a culture of continuous improvement and execution through the Avantor business system. With that, let me turn it over to Tom.

Thank you, Michael, and good afternoon, everyone. Slide 6 shows our organic revenue growth by end market and product group for the quarter. Biopharma, representing approximately 50% of our revenue, experienced double-digit growth in the first quarter. Our biopharma production business grew over 30% in Q1, driven by strong contributions from both chemicals and single-use technologies. Our lab products business also experienced strong growth in chemicals, consumables, and equipment, driven by positive trends in R&D activity. Health care, which represents approximately 10% of our revenue, also experienced double-digit organic revenue growth. Strength was driven by continued COVID testing momentum and a strong rebound of elective procedures. As Michael mentioned, we saw our medical implants business for elective procedures return to pre-pandemic levels in Q1. Education and government, representing approximately 15% of our revenue, experienced mid-teens organic revenue growth in the first quarter. Growth was driven by strength in government COVID-related sales and an incremental improvement in education as more university research activities resume. Advanced technologies & applied materials, representing approximately 25% of our revenue, declined by about 1% in the first quarter. This business continues to show modest signs of improvement, and we are encouraged by macroeconomic signals pulling us to a broader industrial recovery. We saw strong contributions in the quarter from both our AMEA industrial sector and our microelectronics business, offset by weakness in other sectors, including food and beverage. By product group, all our product categories experienced double-digit revenue growth, including our proprietary materials and consumables, driven by strong demand for our biopharma production platform. Notably, Equipment & Instrumentation experienced a significant recovery to double-digit growth, consistent with industry trends and reflecting an increase in CapEx investments as lab activities resumed. Let's move to Slide 7. Looking at growth from a regional perspective, Americas, which represents approximately 60% of global sales, reported 14.6% organic revenue growth and sequential improvement in daily rate of sales from the fourth quarter. Highlights were double-digit growth in biopharma, including approximately 40% growth in biopharma production and greater than 20% growth in health care, driven by hospital and clinical reference lab customers as well as a rebound in medical implants used in elective procedures. Education and government grew double digits, driven by COVID-related government purchases and education growth from COVID diagnostic demand. Europe, which represents approximately 35% of global sales, reported 10.1% organic revenue growth. Growth was driven by biopharma with biopharma production growing double digits. We also experienced continued COVID diagnostic tailwinds, given ongoing COVID challenges in the European region. Health care and education and government both experienced double-digit growth, supported by a recovery in elective procedures and strong consumable sales. AMEA, representing approximately 5% of global sales, reported 27.2% organic revenue growth driven by biopharma as well as a moderate comparable given the early impact of COVID in the region in 2020. Our biopharma production business in AMEA grew nearly 70% in the quarter, and our order book has grown significantly, reflecting strong demand for both chemicals and single-use products. On the right-hand side of the slide, you can see the expansion of our core growth rate, meaning organic growth less the estimated COVID tailwinds versus Q1 last year, rising from approximately 4% to approximately 7% this quarter. As Michael noted, this represents the third consecutive quarter of acceleration. This trend reflects positive end market trends as well as the resilience of our business model and relevance of our market position. Slide 8 has our segment results. Americas reported 24.3% in adjusted margin rate, approximately 320 basis points higher as compared to the prior period. Key drivers include strong volume and productivity, ongoing favorable mix driven by growth in proprietary materials and consumables and commercial excellence. Europe recorded a 20.2% adjusted EBITDA margin rate, approximately 330 basis points higher as compared to the prior period. We continue to experience favorable margin impacts from strong volume, productivity, and commercial excellence. AMEA reported a 22.7% adjusted EBITDA margin rate, approximately 500 basis points higher as compared to the prior period, driven by strong volume growth in proprietary biopharma materials and productivity. Turning to Slide 9. Let me start with our first quarter adjusted EBITDA. We achieved approximately 34% growth in adjusted EBITDA, a 300 basis points of margin expansion. As I indicated on the prior slide, all three regions achieved strong margin expansion, reflecting volume growth, productivity, commercial excellence, discretionary cost containment, and modest mix tailwinds. These mixed tailwinds are tied to strong growth in biopharma production and proprietary consumables as well as a return to growth in our biomaterials offering, partially offset by strong equipment and instrument growth. Regarding earnings per share, we achieved approximately 101% growth in our adjusted EPS for the quarter. Primary drivers were strong operating performance, ongoing reduction in interest expense from our deleveraging and refinancing, and improvement in our income tax rate to 22.4%. We continue to forecast a 24% tax rate for the full year. Turning to free cash flow. As Michael mentioned, we generated $112 million of free cash flow in the first quarter compared to $240 million in the first quarter of 2020. The year-over-year difference primarily relates to the timing of interest payments, investments in working capital and CapEx to support our growth strategy, and higher incentive compensation payments related to our strong 2020 performance. We are reiterating our full year free cash flow guidance of over $800 million. Moving to Slide 10. As Michael indicated, we are raising our guidance for the full year to reflect strong Q1 performance, improving end markets, and COVID-19 dynamics. Based on the outlook for our core business, together with COVID-19 tailwinds of approximately $350 million to $450 million, we are now guiding to 6% to 9% organic growth for 2021 as compared to the original 4% to 7% guidance. Reported growth guidance is approximately 8% to 11% for the year. Growth in April has kept pace with the first quarter, but we do expect moderation in growth rates in the second half of 2021, given the extraordinarily strong comparables in the second half of 2020. We are also increasing our adjusted EBITDA margin expansion expectations to be approximately 75 basis points versus the original 50 basis points. This improvement reflects our strong first quarter results, continuation of higher growth in our proprietary offerings, productivity, and commercial excellence. Also, as global economies begin to open up, we are including in our outlook a return of certain operating costs, such as travel and entertainment, in the second half of 2021 that were previously put on hold due to global pandemic. We now anticipate adjusted earnings per share growth of approximately 40%, up from our previous guidance of approximately 30%. This guidance reflects our strong first quarter results, continued operational improvement, lower interest expense from deleveraging and refinancing, and an effective full year tax rate of 24%. We also maintain a flat share count for guidance purposes. As stated before, we are reiterating our full year free cash flow guidance of over $800 million. Our full year outlook is based on ongoing EBITDA growth and lower interest payments with some modest offsets from increased working capital needs to support our growth. Michael mentioned the leverage ratio improvement we achieved in Q1 to 3.5x EBITDA and an expectation that we'll remain under 4x EBITDA even after funding the Ritter acquisition. On debt pricing, we are pursuing opportunities to further reduce the cost of our term loans, enabled in part by our credit rating improvements and leverage reduction. We expect to share more details about these repricing actions as well as about the Ritter acquisition financing in the coming weeks. Please note that we have not reflected the impact from the Ritter acquisition in this guidance commentary. This concludes my prepared remarks. I will now hand the call back over to Michael.

Reflecting on our first quarter, we are encouraged by the strong financial results and the continued improvement in our core growth rate. We continue to execute effectively, as shown by our significant margin expansion, EPS growth, and deleveraging. We remain committed to our long-term growth strategy, and our agreement to acquire Ritter represents an important milestone in our transformation. We are focused on capitalizing on opportunities in the attractive biopharma end market by making additional investments to expand our manufacturing capacity. These investments will support vaccines and therapies for the COVID-19 pandemic and enhance our growing core business. Our biopharma order book continues to grow, further highlighting the importance of our integrated discovery to delivery business model. Looking ahead, we are well positioned for continued growth and anticipate delivering strong results for the full year. Avantor's mission of advancing science to create a better world has never been more relevant. I appreciate your interest and investment in Avantor and your ongoing support. I will now turn it over to the operator to begin the question-and-answer portion of our call.

We have a question from Tycho Peterson from JPMorgan.

I'll try to squeeze two in. First on the COVID tailwinds. Obviously, you're bumping the guidance here. Testing tailwinds, obviously fading pretty quickly. So can you just talk a little bit about how you're thinking about the relative mix and what's really kind of prompting the increase? And then bioprocess, great numbers. Just curious, was there any element of stockpiling? And then also, how are you thinking about potential kind of mRNA and viral vector therapeutics beyond COVID, given your current capacity?

Thanks, Tycho. It's Michael. I appreciate the question. In response to your first question about the COVID tailwinds, we've raised our full-year outlook by approximately $100 million at the midpoint. The mix aligns with our original expectations of the vaccine contributing 40% to 50% of the total tailwind for the year. We saw a significant increase in Q4 last year, and that trend continued into Q1. Based on our order books and the improved vaccines available, we expect that mix to remain stable throughout the year. Our testing performance was strong in Q1, and we anticipate that strength to carry into the early part of the second quarter. Within our guidance of $350 million to $450 million for tailwinds this year, we expect our diagnostic solutions to contribute at that 40% to 50% level. We also expect a decline in the second half of the year, a view we have maintained from our initial guidance. However, with current global infection rates, the diagnostics workflow continues to show strength. From the bioprocessing side, the business is thriving. As I mentioned in our prepared remarks, our order book is growing impressively due to both vaccine demand and sustained strength in our core operations. The growth in monoclonal antibody production is steady at a mid-to-upper teens rate globally, and we are capturing our share of that market. We're positioned for a strong year ahead. Additionally, we're making significant investments in capacity to meet the growth demands. We're excited about expanding our chemicals and cleanroom capacity for single-use products. Innovation remains a key focus; for instance, we're looking at mRNA applications for non-COVID vaccines, which represents a significant long-term opportunity for our business. We're optimistic about the ongoing momentum and continued funding in our current business and the potential for these technologies to apply to new indications in the future.

I would like to provide some additional context regarding Tycho's question. When we consider COVID testing for the remainder of the year, can we expect the current levels to remain stable, indicating a steady trend rather than a significant decline in the latter half of the year, especially in relation to bioprocessing? Is that a reasonable expectation?

Yes. When we consider the midpoint of approximately $400 million in total tailwinds for the year, and if we reflect on our performance in Q1, your observation about it being relatively consistent throughout the year is accurate. The mix may differ somewhat as we approach the latter half of the year. As I mentioned earlier, we expect the diagnostic testing workflow to potentially be weaker in the second half compared to the first half. We do anticipate continued strength in vaccines, and the contribution from PPE should remain relatively stable throughout the year. If you examine our proprietary materials and consumables solutions, most of our production solutions fall into this category, which is clearly the highest margin segment of our business. Therefore, strength in this area is a significant factor driving our margins. This goes beyond bioproduction, as we have discussed regarding our NuSil platform, which has returned to pre-pandemic levels in the first quarter and will be crucial for us moving forward. Additionally, we have a considerable amount of content in our testing workflows from both a chemical and consumable perspective. As a result, the margins in that part of our workflow are expected to exceed the group average, Derik.

Even when considering margin expansion, there are other factors beyond the COVID impact that are influencing this for the entire year. We have a strong order backlog outside of COVID, especially in biopharma production, and those margins exceed the average of the biopharma portfolio. While the mix is a factor, it goes beyond COVID due to the growth dynamics in the portfolio.

First, on M&A, the Ritter deal. One, what's your capability mark, given you're going to be well within your target leverage range for the year? Two, beyond financial constraints, how would you characterize the organizational readiness for more? And three, how would you describe the deal pipeline at this point? So that's the first topic on M&A. And then on guidance, I was hoping that you'd be able to share more on your assumptions by end market in terms of what's incorporated into revenue guidance for the year. It would be great to get those assumptions for all end markets. That said, in particular, I think it would be interesting to hear more about biopharma and also advanced technologies and applied markets, given there are some signs of cyclical improvement.

Thank you, Doug. This is Tom. I appreciate the questions. Regarding the Ritter deal, when it closes, likely in early to mid-July, it will provide just over $1 billion in M&A capacity in U.S. dollars. Although it's a euro-dollar deal, we believe we can sustain similar aggregate spending or individual deal spending for the remainder of the year, estimating a capacity of between $1 billion and $1.5 billion. Looking ahead to 2022, we expect this capacity to grow based on our activities. This is the first deal we've executed since the major Avantor VWR deal. We had a program management office in place, which has wrapped up its work. However, we have the integration capability to handle deals three times the size of Ritter, while also maintaining ongoing business operations and generating $300 million of synergies from VWR. Our track record indicates we have been able to sustain this over time. While doing multiple integrations simultaneously can be challenging, I don't believe we're at that point yet. In terms of financial capacity, we feel equipped to integrate a deal of this scale. Concerning our deal pipeline, our focus is on areas where we see higher growth rates compared to the Avantor portfolio, as demonstrated by Ritter. We're also aiming for better overall margin rates, both in gross margin and EBITDA margin, which directs us toward proprietary offerings in laboratory space, diagnostic opportunities, and biopharma production, all areas we find particularly appealing. We're seeking deals that have existing profitability and cash flow to facilitate rapid progress. We continue to review our workflow regularly and have capacity in that area. In terms of the guidance on the end market, so just to remind you, overall, we're guiding to 6% to 9% for the year. For biopharma in total, that's probably close to high single digits to low double-digit kind of growth. From a health care perspective, it would be similar. From an education and government perspective, that is the area where we're seeing the most improvement year-over-year, given the decline in education last year. So that would be clearly in the double digits. In terms of advanced technology & applied materials, we're not forecasting a breakout, like we're not including a massive return to growth just yet. And so you can kind of consider that to be low single digits to mid-single-digit kind of growth expectation.

I have a question about the guidance. Michael, it seems like the base, excluding COVID, is around 3.5% to 6.5%. Is my understanding of the base assumptions correct? And is the low end merely a cautious estimate, considering that most of your competitors are expecting mid to high? I'm interested in what factors might lead us to the low end.

Thank you, Vijay, for your question. It's important to highlight that we had a strong performance in the first quarter, marking three consecutive quarters of sequential improvement in our core business. We experienced one less business day in the first quarter. If we account for that, our core growth rate for Q1 was around 8% to 9%. This indicates very strong results from our base business. Moving forward, the comparisons for the base business should become somewhat easier over the next couple of quarters before we encounter a challenging comparison in the fourth quarter. When we analyze the 6% to 9% range, I would say that at the midpoint, considering our COVID-related benefits, we are looking at a few points of growth. However, we can likely indicate a growth range of about 4% to 7% for the base business.

Michael, I have a question for you regarding the advanced technology aspect, which is projected to see low single-digit growth this quarter. I believe it showed growth in the fourth quarter. Tom, you mentioned expecting low single-digit growth for the year. Can you discuss this? It seems that you are optimistic about the macro signals indicating a broader recovery. What does this mean for your outlook? How conservative is that low single-digit expectation? What macro indicators should we watch to suggest a potential increase?

Thank you for the question, Patrick. It's important to provide some context for that portion of our business. It accounts for about a quarter of our total revenues, with roughly half coming from growth-oriented platforms that have some semiconductor exposure. That segment remains quite resilient. Both our proprietary products and various third-party offerings in semiconductor manufacturing continue to perform well. Additionally, around 10% of our business is tied to more cyclical markets such as petrochemicals, oil and gas, and food and beverage. Overall, we experienced a slight decline, just under flat in absolute terms, around 1% lower for the quarter. This represents a modest year-over-year drop that isn't significantly affecting our overall results. The business is essentially on track with its past performance. Even before COVID, we anticipated that segment would see low single-digit growth. Market indicators are stable, and we expect that business to improve sequentially throughout the year, likely reaching low single-digit growth by the end of the year. The single-use segment of our portfolio has been experiencing growth of over 20%, especially as we navigate through the pandemic. Our core business remains robust, and the demand stemming from COVID has further enhanced our performance. Our single-use products are widely utilized across various vaccine production methods. We have developed an investment strategy that we have had to expedite due to the favorable conditions we are witnessing. Our order book, which we frequently mention, is growing significantly, with a substantial portion of that growth coming from our single-use business. This expansion is essential to meet the increasing demand and to ensure more typical lead times for our core offerings, allowing us to implement our capacity efficiently. We are hiring in advance of the facility construction being completed so that we are fully prepared to operate swiftly once the facilities are ready. Additionally, we are pleased to announce the recent acquisition of a second site in Europe that will take a couple of months to prepare for operations. By July, we expect to commence production of single-use assemblies at that location. Our team is doing an excellent job managing growth and ensuring that we can sustain our capacity.

Just a follow-up on Patrick's question on the capacity expansion. Can you give us an idea of how big your single-use business is now? And then what we should expect from an incremental sales perspective over the next couple of years as that business comes online and that capacity starts filling out?

That part of our business is in probably 20% to 30% of our total bioproduction platform. And how it's been growing pre-pandemic north of 20%. And obviously, we're seeing tailwinds on top of that this year. But no reason why that type of growth rate won't persist for at least through the midterm here. We're really excited about the opportunity to bring these manufacturing capabilities into our portfolio. It fits perfectly with our consumables offering for automated lab workflows across various end markets. The products are used extensively in clinical trial workflows and drug discovery, particularly in biopharma. We're eager to expand the offering that Ritter has beyond their traditional OEM focus. The clinical diagnostics exposure of the business is another area where we see significant customer overlap and interest. We're already selling substantial content in these workflows, so the products from Ritter will integrate seamlessly into our channel. Our sales associates are enthusiastic about adding it to the rest of their offerings. Since the announcement, our customers have expressed their excitement about including this in our future offerings. This area has faced structural constraints, especially during the pandemic and even prior to that. With the scale and reach we will bring, along with the ability to accelerate investments for business expansion over time, this will become an attractive component of our strategy.

A couple one ripping off Jack's question. Could you characterize your COVID diagnostics exposure in terms of how much is lab-based testing versus how much is the point-of-care testing you distribute, just as I think all of us are trying to understand the divergent COVID views out there?

Yes. Dan, thanks for the question. So as we mentioned before, we're going to have offerings that are going to span kind of the three major categories of the testing workflow with PCR testing certainly being the most important for us. But we do have significant content on the antigen-based tests that are out there even at the deployment care. As you mentioned, we've been providing content to OEMs in their production of these tests and in kits as well as in distributing the test kits and the tests themselves. And then as we've said from the beginning, we also have, I think, offering for serological testing, which today hasn't had much traction as a workflow. How that plays out longer term is yet to be determined. But today, the preponderance of our exposure will be on PCR and antigen-based testing again. No, it's a good question. We're obviously following the developments in the region pretty closely. From a citizen perspective, it's probably disturbing to see what's unfolding in India, for example, with the infection rate that we do see there. We see most of the concern is probably centered around India. China continues to be strong. Southeast Asia around Singapore and Korea continue to be pretty strong, particularly from a bioproduction standpoint. We have a significant order book to support all three of those regions, and we anticipate continued momentum there. India for us is probably less than a percent of the overall business today for us. So it's a pretty modest impact. And I can imagine the return to kind of pre-pandemic levels for some of the end markets that we serve there being stumbled a bit here, given the outrage that they're experiencing. At the same time though, we're seeing obviously very, very strong demand for things like PPE and diagnostic testing solutions, which obviously we're well-prepared to provide. So the mix of the business probably unfolds a little bit differently than what we had imagined, but the business continues to run well. But we're following it quite closely. But we would anticipate continued momentum in the region.

Yes. To elaborate a bit further, Dan, I wouldn't focus too much on the 27% in Q1. As Michael mentioned, we expect strong performance, but we've adjusted our expectations to around a double-digit increase for the year. Last year, we had a particularly strong Q2, partly due to the COVID testing that Michael referred to. There are certain comp factors we need to consider that are counter to our overall comp for Q2. I anticipate a strong overall performance for the year, but I would advise you to temper your expectations based on the exceptional Q1 results.

Just one sort of follow-up, Michael, for you, on the vaccine front. I mean, there's growing chatter around the need for boosters and so on. Does the vaccine portion of your COVID forecast still essentially only account for the current order book and any sort of future forecasting? And then second, on a related note, last quarter, you had noticed that the timing of the vaccine ramp is important and if it ramps sooner than your capacity does, you may not be able to capture all that sort of upside that you think you're eligible for. So in light of this recent capacity expansion, et cetera, can you just give us an update on that situation?

Great questions, Tejas. I appreciate you joining the call tonight. From an outlook standpoint, built into the $350 million to $450 million guide there, at this stage, certainly reflects the approvals that are in place as well as the order book that we do have, which is pretty significant. It's continuing to build aggressively in the quarter. And not only do we have strong orders that extend throughout 2021, but we're also starting to now get orders that are investing for delivery in 2022. So I think on that part of the business, we certainly have a good line of sight. But I think it's becoming almost the prevailing wisdom that there will be a need for a booster shot this fall to address the various variants, mutations that are out there. And I think you start to see that build into the planning. One of the implications, as you noted, a strong vaccine ramp is just whether or not you have instantaneously enough capacity to support that as well as really robust base business order book. Certainly, both we and our industry peers have faced challenges this quarter regarding the graded order status associated with vaccine orders. These orders must be prioritized according to Department of Defense protocols, which requires them to take precedence. This has led to delays and adjustments in the delivery dates for some of our core businesses. We have had several expansions come online and have more planned throughout the year that should help alleviate some of these issues. However, I anticipate that the supply chains across the industry will continue to be strained well into next year. We really appreciate that platform. Historically, it has shown great resilience and strong growth potential. It is reasonable to expect that platform to achieve high single-digit to double-digit growth rates, which reflects the strength we observe in our numbers. The business continues to perform well. We have excellent technology and a presence that enables us to support growth from the fabs in Asia and the U.S. This is definitely one of the strengths of the advanced technology sector of our business.

There are no further questions at this time. I would like to turn back the call to Mr. Michael Stubblefield for closing remarks. Thank you.

Thank you again for participating in our call today. I wanted to take the opportunity to make you all aware of our intent to host an Analyst and Investor Day on Thursday, September 9. We'll be sharing more details, including registration information on that in the coming weeks. But as we close here the proceedings, I want to express my continued gratitude for all of the efforts that our associates are putting in around the world, who are living our values every day and helping us live our mission of setting science in motion to create a better world. This team and the resolve and steadfast support of our customers is super-critical to our mission and our success. We're excited about what lies ahead for our business and for Avantor and look forward to updating you when we meet next. Until then, take care and be well, everyone. Thank you.

Ladies and gentlemen, this concludes today's conference call. You may now disconnect. Thank you for participating.